How To YieldBoost Sinclair From 7.4% To 15.1% Using Options
May 06, 2024 at 11:34 AM EDT
Shareholders of Sinclair Inc (SBGI) looking to boost their income beyond the stock's 7.4% annualized dividend yield can sell the December covered call at the $20 strike and collect the premium based on the 65 cents bid, which annualizes to an additional 7.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.1% 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 SBGI shares would have to climb 47.8% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 52.6% return from this trading level, in addition to any dividends collected before the stock was called.