YieldBoost Louisiana-Pacific From 1.2% To 10.9% Using Options
June 28, 2024 at 13:53 PM EDT
Shareholders of Louisiana-Pacific Corp (LPX) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the June 2025 covered call at the $95 strike and collect the premium based on the $7.90 bid, which annualizes to an additional 9.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.9% annualized rate in the scenario where the stock is not called away. Any upside above $95 would be lost if the stock rises there and is called away, but LPX shares would have to advance 13.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 22.8% return from this trading level, in addition to any dividends collected before the stock was called.
