YieldBoost CDW To 11.5% Using Options
April 03, 2024 at 12:25 PM EDT
Shareholders of CDW Corp (CDW) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the September covered call at the $260 strike and collect the premium based on the $12.50 bid, which annualizes to an additional 10.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.5% annualized rate in the scenario where the stock is not called away. Any upside above $260 would be lost if the stock rises there and is called away, but CDW shares would have to advance 2.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 7.1% return from this trading level, in addition to any dividends collected before the stock was called.