How To YieldBoost W & T Offshore From 1.9% To 14.4% Using Options
September 19, 2024 at 11:36 AM EDT
Shareholders of W & T Offshore Inc (WTI) looking to boost their income beyond the stock's 1.9% annualized dividend yield can sell the January 2026 covered call at the $2.50 strike and collect the premium based on the 35 cents bid, which annualizes to an additional 12.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.4% annualized rate in the scenario where the stock is not called away. Any upside above $2.50 would be lost if the stock rises there and is called away, but WTI shares would have to climb 18.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 35.1% return from this trading level, in addition to any dividends collected before the stock was called.