YieldBoost American Financial Group From 1.6% To 10.6% Using Options
November 12, 2021 at 11:59 AM EST
Shareholders of American Financial Group Inc (AFG) looking to boost their income beyond the stock's 1.6% annualized dividend yield can sell the June 2022 covered call at the $146 strike and collect the premium based on the $7.60 bid, which annualizes to an additional 9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.6% annualized rate in the scenario where the stock is not called away. Any upside above $146 would be lost if the stock rises there and is called away, but AFG shares would have to climb 3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.4% return from this trading level, in addition to any dividends collected before the stock was called.
