How To YieldBoost Safe Bulkers To 7.8% Using Options

Shareholders of Safe Bulkers Inc (SB) looking to boost their income beyond the stock's 2.1% annualized dividend yield can sell the October covered call at the $5 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 5.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.8% annualized rate in the scenario where the stock is not called away. Any upside above $5 would be lost if the stock rises there and is called away, but SB shares would have to climb 33.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 36% return from this trading level, in addition to any dividends collected before the stock was called.
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