How To YieldBoost American Financial Group To 34.1% Using Options

Shareholders of American Financial Group Inc (AFG) looking to boost their income beyond the stock's 2.2% annualized dividend yield can sell the June covered call at the $151 strike and collect the premium based on the $3.30 bid, which annualizes to an additional 31.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 34.1% annualized rate in the scenario where the stock is not called away. Any upside above $151 would be lost if the stock rises there and is called away, but AFG shares would have to advance 16.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 18.6% return from this trading level, in addition to any dividends collected before the stock was called.