YieldBoost FutureFuel Corp From 1.8% To 13.2% Using Options
March 03, 2016 at 11:41 AM EST
Shareholders of FutureFuel Corp (FF) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the August covered call at the $15 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 11.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.2% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but FF shares would have to advance 12.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 18.1% return from this trading level, in addition to any dividends collected before the stock was called.