Strategy To YieldBoost OFG Bancorp To 13.7% Using Options
July 15, 2019 at 11:47 AM EDT
Shareholders of OFG Bancorp (OFG) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the February 2020 covered call at the $25 strike and collect the premium based on the $1.80 bid, which annualizes to an additional 12.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.7% annualized rate in the scenario where the stock is not called away. Any upside above $25 would be lost if the stock rises there and is called away, but OFG shares would have to climb 5.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 13.3% return from this trading level, in addition to any dividends collected before the stock was called.
