How To YieldBoost Eagle Materials From 0.4% To 10.2% Using Options

Shareholders of Eagle Materials Inc (EXP) looking to boost their income beyond the stock's 0.4% annualized dividend yield can sell the January 2015 covered call at the $100 strike and collect the premium based on the $5.00 bid, which annualizes to an additional 9.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.2% annualized rate in the scenario where the stock is not called away. Any upside above $100 would be lost if the stock rises there and is called away, but EXP shares would have to climb 6.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 11.8% return from this trading level, in addition to any dividends collected before the stock was called.
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