How To YieldBoost Big 5 Sporting Goods Corp From 2.4% To 9.3% Using Options

Shareholders of Big 5 Sporting Goods Corp (BGFV) looking to boost their income beyond the stock's 2.4% annualized dividend yield can sell the October covered call at the $20 strike and collect the premium based on the 60 cents bid, which annualizes to an additional 6.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.3% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but BGFV shares would have to advance 21.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 24.7% return from this trading level, in addition to any dividends collected before the stock was called.