Strategy To YieldBoost GPMT To 41.9% Using Options

Shareholders of Granite Point Mortgage Trust Inc (GPMT) looking to boost their income beyond the stock's 13.8% annualized dividend yield can sell the May covered call at the $5 strike and collect the premium based on the 5 cents bid, which annualizes to an additional 28.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 41.9% annualized rate in the scenario where the stock is not called away. Any upside above $5 would be lost if the stock rises there and is called away, but GPMT shares would have to advance 15.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 16.6% return from this trading level, in addition to any dividends collected before the stock was called.