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YieldBoost TNK From 8.6% To 14.3% Using Options

Shareholders of Teekay Tankers Ltd (TNK) looking to boost their income beyond the stock's 8.6% annualized dividend yield can sell the August covered call at the $2.50 strike and collect the premium based on the 5 cents bid, which annualizes to an additional 5.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.3% annualized rate in the scenario where the stock is not called away. Any upside above $2.50 would be lost if the stock rises there and is called away, but TNK shares would have to climb 78.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 82.1% return from this trading level, in addition to any dividends collected before the stock was called.
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