How To YieldBoost Bank of America From 2.3% To 4.9% Using Options
July 10, 2024 at 11:46 AM EDT
Shareholders of Bank of America Corp (BAC) looking to boost their income beyond the stock's 2.3% annualized dividend yield can sell the December 2026 covered call at the $55 strike and collect the premium based on the $2.59 bid, which annualizes to an additional 2.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.9% 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 BAC shares would have to advance 32.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 39.2% return from this trading level, in addition to any dividends collected before the stock was called.