How To YieldBoost NPO To 11% Using Options

Shareholders of EnPro Industries Inc (NPO) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the December covered call at the $80 strike and collect the premium based on the $4.10 bid, which annualizes to an additional 9.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11% annualized rate in the scenario where the stock is not called away. Any upside above $80 would be lost if the stock rises there and is called away, but NPO shares would have to advance 6.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.8% return from this trading level, in addition to any dividends collected before the stock was called.