YieldBoost EGBN To 11.3% Using Options

Shareholders of Eagle Bancorp Inc (EGBN) looking to boost their income beyond the stock's 2.6% annualized dividend yield can sell the June covered call at the $30 strike and collect the premium based on the $1.00 bid, which annualizes to an additional 8.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.3% annualized rate in the scenario where the stock is not called away. Any upside above $30 would be lost if the stock rises there and is called away, but EGBN shares would have to climb 20% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 24% return from this trading level, in addition to any dividends collected before the stock was called.