YieldBoost Tiptree To 11.1% Using Options
July 15, 2024 at 11:42 AM EDT
Shareholders of Tiptree Inc (TIPT) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the December covered call at the $20 strike and collect the premium based on the 75 cents bid, which annualizes to an additional 9.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.1% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but TIPT shares would have to advance 12.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 16.8% return from this trading level, in addition to any dividends collected before the stock was called.
