YieldBoost UVE From 2.3% To 15.7% Using Options
July 15, 2019 at 11:46 AM EDT
Shareholders of Universal Insurance Holdings Inc (UVE) looking to boost their income beyond the stock's 2.3% annualized dividend yield can sell the November covered call at the $30 strike and collect the premium based on the $1.25 bid, which annualizes to an additional 13.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.7% annualized rate in the scenario where the stock is not called away. Any upside above $30 would be lost if the stock rises there and is called away, but UVE shares would have to advance 8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 12.4% return from this trading level, in addition to any dividends collected before the stock was called.
