How To YieldBoost Radius Recycling To 16.8% Using Options

Shareholders of Radius Recycling Inc (RDUS) looking to boost their income beyond the stock's 4.7% annualized dividend yield can sell the November covered call at the $20 strike and collect the premium based on the 85 cents bid, which annualizes to an additional 12.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.8% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but RDUS shares would have to climb 25.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 30.7% return from this trading level, in addition to any dividends collected before the stock was called.