YieldBoost ASEI To 12.4% Using Options

Shareholders of American Science & Engineering Inc (ASEI) looking to boost their income beyond the stock's 5.1% annualized dividend yield can sell the January 2016 covered call at the $45 strike and collect the premium based on the $1.80 bid, which annualizes to an additional 7.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.4% annualized rate in the scenario where the stock is not called away. Any upside above $45 would be lost if the stock rises there and is called away, but ASEI shares would have to advance 14.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 18.9% return from this trading level, in addition to any dividends collected before the stock was called.