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Strategy To YieldBoost Gain Capital Holdings To 25.2% Using Options

Shareholders of Gain Capital Holdings Inc (GCAP) looking to boost their income beyond the stock's 3.4% annualized dividend yield can sell the July covered call at the $8 strike and collect the premium based on the 55 cents bid, which annualizes to an additional 21.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 25.2% annualized rate in the scenario where the stock is not called away. Any upside above $8 would be lost if the stock rises there and is called away, but GCAP shares would have to climb 13.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 21.1% return from this trading level, in addition to any dividends collected before the stock was called.
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