How To YieldBoost CME To 4.2% Using Options

Shareholders of CME Group (CME) looking to boost their income beyond the stock's 2.5% annualized dividend yield can sell the January 2016 covered call at the $85 strike and collect the premium based on the $1.90 bid, which annualizes to an additional 1.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.2% 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 CME shares would have to climb 14.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 16.9% return from this trading level, in addition to any dividends collected before the stock was called.