YieldBoost Monolithic Power Systems To 5.5% Using Options

Shareholders of Monolithic Power Systems Inc (MPWR) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the December 2022 covered call at the $660 strike and collect the premium based on the $32.50 bid, which annualizes to an additional 5.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.5% annualized rate in the scenario where the stock is not called away. Any upside above $660 would be lost if the stock rises there and is called away, but MPWR shares would have to advance 30.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 37.3% return from this trading level, in addition to any dividends collected before the stock was called.
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