YieldBoost Amgen To 4.7% Using Options
December 12, 2016 at 11:51 AM EST
Shareholders of Amgen Inc (AMGN) looking to boost their income beyond the stock's 2.8% annualized dividend yield can sell the January 2019 covered call at the $185 strike and collect the premium based on the $5.80 bid, which annualizes to an additional 1.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.7% annualized rate in the scenario where the stock is not called away. Any upside above $185 would be lost if the stock rises there and is called away, but AMGN shares would have to climb 29% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 33% return from this trading level, in addition to any dividends collected before the stock was called.