YieldBoost Reynolds American To 12.8% Using Options

Shareholders of Reynolds American (NYSE: RAI) looking to boost their income beyond the stock's 5.1% annualized dividend yield can sell the May 2014 covered call at the $50 strike and collect the premium based on the $1.50 bid, which annualizes to an additional 7.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.8% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the ...