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September 01, 2020 1:28pm
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YieldBoost VSTS From 1% To 6.9% Using Options

Shareholders of Vestis Corp (VSTS) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the August 2025 covered call at the $20 strike and collect the premium based on the 75 cents bid, which annualizes to an additional 5.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.9% 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 VSTS shares would have to climb 36.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 41.5% return from this trading level, in addition to any dividends collected before the stock was called.
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