How To YieldBoost LMNR To 20.4% Using Options
May 21, 2018 at 11:48 AM EDT
Shareholders of Limoneira Co (LMNR) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the September covered call at the $25 strike and collect the premium based on the $1.60 bid, which annualizes to an additional 19.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 20.4% 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 advance 2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.6% return from this trading level, in addition to any dividends collected before the stock was called.