Strategy To YieldBoost Entergy To 12.3% Using Options
June 14, 2024 at 11:35 AM EDT
Shareholders of Entergy Corp (ETR) looking to boost their income beyond the stock's 4.2% annualized dividend yield can sell the September covered call at the $110 strike and collect the premium based on the $2.30 bid, which annualizes to an additional 8.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.3% annualized rate in the scenario where the stock is not called away. Any upside above $110 would be lost if the stock rises there and is called away, but ETR shares would have to climb 3.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 5.7% return from this trading level, in addition to any dividends collected before the stock was called.