How To YieldBoost NNBR To 14.4% Using Options
April 10, 2018 at 11:59 AM EDT
Shareholders of NN, Inc (NNBR) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the September covered call at the $25 strike and collect the premium based on the $1.30 bid, which annualizes to an additional 13.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.4% 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 NNBR shares would have to climb 13.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 19.3% return from this trading level, in addition to any dividends collected before the stock was called.