Strategy To YieldBoost ANDE To 13.4% Using Options

Shareholders of Andersons Inc (ANDE) looking to boost their income beyond the stock's 2.3% annualized dividend yield can sell the December covered call at the $35 strike and collect the premium based on the $1.05 bid, which annualizes to an additional 11.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.4% annualized rate in the scenario where the stock is not called away. Any upside above $35 would be lost if the stock rises there and is called away, but ANDE shares would have to climb 16.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 20.1% return from this trading level, in addition to any dividends collected before the stock was called.
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