YieldBoost UDR To 10.8% Using Options

Shareholders of UDR Inc (UDR) looking to boost their income beyond the stock's 3.3% annualized dividend yield can sell the September covered call at the $40 strike and collect the premium based on the 25 cents bid, which annualizes to an additional 7.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.8% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but UDR shares would have to climb 1.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 2.4% return from this trading level, in addition to any dividends collected before the stock was called.