How To YieldBoost Best Buy To 6.2% Using Options

Shareholders of Best Buy Inc (BBY) looking to boost their income beyond the stock's 3% annualized dividend yield can sell the January 2018 covered call at the $42 strike and collect the premium based on the $2.07 bid, which annualizes to an additional 3.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.2% annualized rate in the scenario where the stock is not called away. Any upside above $42 would be lost if the stock rises there and is called away, but BBY shares would have to climb 36% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 42.8% return from this trading level, in addition to any dividends collected before the stock was called.