How To YieldBoost CI From 1.7% To 5% Using Options
May 23, 2024 at 13:26 PM EDT
Shareholders of The Cigna Group (CI) looking to boost their income beyond the stock's 1.7% annualized dividend yield can sell the January 2026 covered call at the $420 strike and collect the premium based on the $18.80 bid, which annualizes to an additional 3.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5% annualized rate in the scenario where the stock is not called away. Any upside above $420 would be lost if the stock rises there and is called away, but CI shares would have to climb 24.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 29.8% return from this trading level, in addition to any dividends collected before the stock was called.