How To YieldBoost PRGS To 10.8% Using Options
October 28, 2021 at 11:49 AM EDT
Shareholders of Progress Software Corp (PRGS) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the June 2022 covered call at the $55 strike and collect the premium based on the $3.00 bid, which annualizes to an additional 9.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.8% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but PRGS shares would have to climb 9.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15.2% return from this trading level, in addition to any dividends collected before the stock was called.