How To YieldBoost Merck & Co. To 4.9% Using Options

Shareholders of Merck & Co., Inc (MRK) looking to boost their income beyond the stock's 3.1% annualized dividend yield can sell the January 2017 covered call at the $67.50 strike and collect the premium based on the $1.53 bid, which annualizes to an additional 1.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.9% annualized rate in the scenario where the stock is not called away. Any upside above $67.50 would be lost if the stock rises there and is called away, but MRK shares would have to climb 15.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 18.2% return from this trading level, in addition to any dividends collected before the stock was called.
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