YieldBoost AES To 22.3% Using Options
July 17, 2024 at 12:14 PM EDT
Shareholders of AES Corp (AES) looking to boost their income beyond the stock's 4% annualized dividend yield can sell the January 2025 covered call at the $18 strike and collect the premium based on the $1.60 bid, which annualizes to an additional 18.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 22.3% annualized rate in the scenario where the stock is not called away. Any upside above $18 would be lost if the stock rises there and is called away, but AES shares would have to advance 3.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 13.2% return from this trading level, in addition to any dividends collected before the stock was called.