How To YieldBoost Lamb Weston Holdings To 8.7% Using Options
June 13, 2024 at 11:44 AM EDT
Shareholders of Lamb Weston Holdings Inc (LW) looking to boost their income beyond the stock's 1.7% annualized dividend yield can sell the January 2026 covered call at the $100 strike and collect the premium based on the $9.60 bid, which annualizes to an additional 7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.7% annualized rate in the scenario where the stock is not called away. Any upside above $100 would be lost if the stock rises there and is called away, but LW shares would have to climb 17.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 28.4% return from this trading level, in addition to any dividends collected before the stock was called.