YieldBoost PetMed Express From 4.2% To 25.7% Using Options
November 22, 2021 at 11:57 AM EST
Shareholders of PetMed Express Inc (PETS) looking to boost their income beyond the stock's 4.2% annualized dividend yield can sell the June 2022 covered call at the $30 strike and collect the premium based on the $3.50 bid, which annualizes to an additional 21.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 25.7% annualized rate in the scenario where the stock is not called away. Any upside above $30 would be lost if the stock rises there and is called away, but PETS shares would have to climb 4.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 16.4% return from this trading level, in addition to any dividends collected before the stock was called.