How To YieldBoost WTI From 1.9% To 16.8% Using Options
June 20, 2024 at 11:42 AM EDT
Shareholders of W & T Offshore Inc (WTI) looking to boost their income beyond the stock's 1.9% annualized dividend yield can sell the October covered call at the $3 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 14.9% 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 $3 would be lost if the stock rises there and is called away, but WTI shares would have to advance 47.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 52% return from this trading level, in addition to any dividends collected before the stock was called.