Strategy To YieldBoost ACAT From 0.8% To 23.4% Using Options

Shareholders of Arctic Cat (ACAT) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the June covered call at the $50 strike and collect the premium based on the $2.80 bid, which annualizes to an additional 22.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 23.4% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but ACAT shares would have to climb 3.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.6% return from this trading level, in addition to any dividends collected before the stock was called.