YieldBoost LMNR From 0.9% To 13.6% Using Options
December 06, 2017 at 11:37 AM EST
Shareholders of Limoneira Co (LMNR) looking to boost their income beyond the stock's 0.9% annualized dividend yield can sell the June 2018 covered call at the $25 strike and collect the premium based on the $1.55 bid, which annualizes to an additional 12.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.6% annualized rate in the scenario where the stock is not called away. Any upside above $25 would be lost if the stock rises there and is called away, but LMNR shares would have to climb 6.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 13.6% return from this trading level, in addition to any dividends collected before the stock was called.