YieldBoost Ralph Lauren Corp To 5.7% Using Options

Shareholders of Ralph Lauren Corp (RL) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the January 2018 covered call at the $125 strike and collect the premium based on the $5.50 bid, which annualizes to an additional 3.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.7% annualized rate in the scenario where the stock is not called away. Any upside above $125 would be lost if the stock rises there and is called away, but RL shares would have to advance 25.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 30.7% return from this trading level, in addition to any dividends collected before the stock was called.