YieldBoost BBW To 17.4% Using Options
July 08, 2024 at 11:41 AM EDT
Shareholders of Build-A-Bear Workshop Inc (BBW) looking to boost their income beyond the stock's 3.2% annualized dividend yield can sell the December covered call at the $27.50 strike and collect the premium based on the $1.60 bid, which annualizes to an additional 14.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.4% annualized rate in the scenario where the stock is not called away. Any upside above $27.50 would be lost if the stock rises there and is called away, but BBW shares would have to climb 10.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 16.6% return from this trading level, in addition to any dividends collected before the stock was called.