Strategy To YieldBoost Bel Fuse From 0.4% To 17.1% Using Options
June 25, 2024 at 11:37 AM EDT
Shareholders of Bel Fuse Inc (BELFB) looking to boost their income beyond the stock's 0.4% annualized dividend yield can sell the September covered call at the $70 strike and collect the premium based on the $2.50 bid, which annualizes to an additional 16.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.1% annualized rate in the scenario where the stock is not called away. Any upside above $70 would be lost if the stock rises there and is called away, but BELFB shares would have to advance 10.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 14.9% return from this trading level, in addition to any dividends collected before the stock was called.