Strategy To YieldBoost Albertsons Companies From 2.3% To 62.5% Using Options
May 23, 2024 at 13:27 PM EDT
Shareholders of Albertsons Companies Inc (ACI) looking to boost their income beyond the stock's 2.3% annualized dividend yield can sell the October covered call at the $31 strike and collect the premium based on the $5.00 bid, which annualizes to an additional 60.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 62.5% annualized rate in the scenario where the stock is not called away. Any upside above $31 would be lost if the stock rises there and is called away, but ACI shares would have to climb 51.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 75.6% return from this trading level, in addition to any dividends collected before the stock was called.