YieldBoost Simulations Plus To 24.5% Using Options
October 15, 2021 at 11:42 AM EDT
Shareholders of Simulations Plus Inc (SLP) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the November covered call at the $45 strike and collect the premium based on the 95 cents bid, which annualizes to an additional 23.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 24.5% annualized rate in the scenario where the stock is not called away. Any upside above $45 would be lost if the stock rises there and is called away, but SLP shares would have to climb 8.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 11% return from this trading level, in addition to any dividends collected before the stock was called.
