YieldBoost NAT To 21.3% Using Options
July 03, 2024 at 12:09 PM EDT
Shareholders of Nordic American Tankers Ltd (NAT) looking to boost their income beyond the stock's 12.1% annualized dividend yield can sell the January 2025 covered call at the $4.50 strike and collect the premium based on the 20 cents bid, which annualizes to an additional 9.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 21.3% annualized rate in the scenario where the stock is not called away. Any upside above $4.50 would be lost if the stock rises there and is called away, but NAT shares would have to advance 12.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 17.5% return from this trading level, in addition to any dividends collected before the stock was called.