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September 01, 2020 1:43pm
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Strategy To YieldBoost Gen Digital To 17% Using Options

Shareholders of Gen Digital Inc (GEN) looking to boost their income beyond the stock's 2.4% annualized dividend yield can sell the September covered call at the $22 strike and collect the premium based on the $1.20 bid, which annualizes to an additional 14.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17% annualized rate in the scenario where the stock is not called away. Any upside above $22 would be lost if the stock rises there and is called away, but GEN shares would have to advance 5.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.4% return from this trading level, in addition to any dividends collected before the stock was called.
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