YieldBoost DNUT To 18% Using Options

Shareholders of Krispy Kreme Inc (DNUT) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the November covered call at the $12.50 strike and collect the premium based on the 45 cents bid, which annualizes to an additional 16.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18% annualized rate in the scenario where the stock is not called away. Any upside above $12.50 would be lost if the stock rises there and is called away, but DNUT shares would have to advance 20.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 25% return from this trading level, in addition to any dividends collected before the stock was called.