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September 01, 2020 1:28pm
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Strategy To YieldBoost MAA From 2% To 7.9% Using Options

Shareholders of Mid-America Apartment Communities Inc (MAA) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the November 2022 covered call at the $210 strike and collect the premium based on the $11.80 bid, which annualizes to an additional 5.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.9% annualized rate in the scenario where the stock is not called away. Any upside above $210 would be lost if the stock rises there and is called away, but MAA shares would have to climb 4.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.9% return from this trading level, in addition to any dividends collected before the stock was called.
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