Strategy To YieldBoost AIV From 3.3% To 7.6% Using Options

Shareholders of Apartment Investment & Management Co (AIV) looking to boost their income beyond the stock's 3.3% annualized dividend yield can sell the September covered call at the $50 strike and collect the premium based on the 85 cents bid, which annualizes to an additional 4.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.6% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but AIV shares would have to advance 4.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 5.9% return from this trading level, in addition to any dividends collected before the stock was called.