Strategy To YieldBoost MEI From 3.7% To 24.6% Using Options

Shareholders of Methode Electronics Inc (MEI) looking to boost their income beyond the stock's 3.7% annualized dividend yield can sell the October covered call at the $22.50 strike and collect the premium based on the $1.95 bid, which annualizes to an additional 20.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 24.6% annualized rate in the scenario where the stock is not called away. Any upside above $22.50 would be lost if the stock rises there and is called away, but MEI shares would have to climb 48.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 61.2% return from this trading level, in addition to any dividends collected before the stock was called.