Strategy To YieldBoost PWP From 1.8% To 14.8% Using Options
July 03, 2024 at 12:10 PM EDT
Shareholders of Perella Weinberg Partners (PWP) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the October covered call at the $17.50 strike and collect the premium based on the 60 cents bid, which annualizes to an additional 13.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.8% annualized rate in the scenario where the stock is not called away. Any upside above $17.50 would be lost if the stock rises there and is called away, but PWP shares would have to advance 11.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15.5% return from this trading level, in addition to any dividends collected before the stock was called.