Strategy To YieldBoost Bassett Furniture Industries To 12.2% Using Options
December 27, 2016 at 11:41 AM EST
Shareholders of Bassett Furniture Industries, Inc (BSET) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the July 2017 covered call at the $34.70 strike and collect the premium based on the $1.90 bid, which annualizes to an additional 10.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.2% annualized rate in the scenario where the stock is not called away. Any upside above $34.70 would be lost if the stock rises there and is called away, but BSET shares would have to advance 11.9% from current levels for that to occur, 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.