How To YieldBoost SandRidge Energy From 3.4% To 11.3% Using Options
August 16, 2024 at 11:47 AM EDT
Shareholders of SandRidge Energy Inc (SD) looking to boost their income beyond the stock's 3.4% annualized dividend yield can sell the April 2025 covered call at the $15 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.3% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but SD shares would have to advance 14.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 19.5% return from this trading level, in addition to any dividends collected before the stock was called.