Strategy To YieldBoost Everest Group To 9.1% Using Options
July 15, 2024 at 11:37 AM EDT
Shareholders of Everest Group Ltd (EG) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the January 2025 covered call at the $420 strike and collect the premium based on the $14.10 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 9.1% annualized rate in the scenario where the stock is not called away. Any upside above $420 would be lost if the stock rises there and is called away, but EG shares would have to advance 6.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 10.3% return from this trading level, in addition to any dividends collected before the stock was called.
