How To YieldBoost SCHL To 11.9% Using Options
March 06, 2024 at 11:37 AM EST
Shareholders of Scholastic Corp (SCHL) looking to boost their income beyond the stock's 2.1% annualized dividend yield can sell the September covered call at the $45 strike and collect the premium based on the $2.00 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 11.9% annualized rate in the scenario where the stock is not called away. Any upside above $45 would be lost if the stock rises there and is called away, but SCHL shares would have to advance 19.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 24.3% return from this trading level, in addition to any dividends collected before the stock was called.