How To YieldBoost Stryker To 3.9% Using Options
July 17, 2024 at 12:14 PM EDT
Shareholders of Stryker Corp (SYK) looking to boost their income beyond the stock's 0.9% annualized dividend yield can sell the January 2026 covered call at the $420 strike and collect the premium based on the $15.00 bid, which annualizes to an additional 2.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 3.9% annualized rate in the scenario where the stock is not called away. Any upside above $420 would be lost if the stock rises there and is called away, but SYK shares would have to advance 23% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 27.4% return from this trading level, in addition to any dividends collected before the stock was called.
