YieldBoost FRT From 4% To 16.2% Using Options

Shareholders of Federal Realty Investment Trust (FRT) looking to boost their income beyond the stock's 4% annualized dividend yield can sell the May covered call at the $110 strike and collect the premium based on the $3.40 bid, which annualizes to an additional 12.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.2% annualized rate in the scenario where the stock is not called away. Any upside above $110 would be lost if the stock rises there and is called away, but FRT shares would have to advance 0.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 3.5% return from this trading level, in addition to any dividends collected before the stock was called.