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September 01, 2020 1:37pm
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YieldBoost MRTN To 16.5% Using Options

Shareholders of Marten Transport Ltd (MRTN) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the June covered call at the $20 strike and collect the premium based on the $1.30 bid, which annualizes to an additional 15.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.5% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but MRTN shares would have to advance 3.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 10.2% return from this trading level, in addition to any dividends collected before the stock was called.
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