YieldBoost DIN From 3.7% To 13% Using Options

Shareholders of DineEquity (DIN) looking to boost their income beyond the stock's 3.7% annualized dividend yield can sell the September covered call at the $85 strike and collect the premium based on the $4.00 bid, which annualizes to an additional 9.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13% annualized rate in the scenario where the stock is not called away. Any upside above $85 would be lost if the stock rises there and is called away, but DIN shares would have to advance 4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.9% return from this trading level, in addition to any dividends collected before the stock was called.
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