Strategy To YieldBoost Travelers Companies From 2.1% To 5.9% Using Options

Shareholders of Travelers Companies Inc (TRV) looking to boost their income beyond the stock's 2.1% annualized dividend yield can sell the January 2018 covered call at the $120 strike and collect the premium based on the $7.70 bid, which annualizes to an additional 3.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.9% annualized rate in the scenario where the stock is not called away. Any upside above $120 would be lost if the stock rises there and is called away, but TRV shares would have to advance 4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 10.6% return from this trading level, in addition to any dividends collected before the stock was called.