YieldBoost AMETEK From 0.7% To 8.2% Using Options
April 22, 2019 at 11:50 AM EDT
Shareholders of AMETEK Inc (AME) looking to boost their income beyond the stock's 0.7% annualized dividend yield can sell the September covered call at the $90 strike and collect the premium based on the $2.70 bid, which annualizes to an additional 7.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.2% annualized rate in the scenario where the stock is not called away. Any upside above $90 would be lost if the stock rises there and is called away, but AME shares would have to climb 4.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 7.4% return from this trading level, in addition to any dividends collected before the stock was called.