YieldBoost Chevron Corporation To 6.1% Using Options
August 21, 2018 at 11:48 AM EDT
Shareholders of Chevron Corporation (CVX) looking to boost their income beyond the stock's 3.8% annualized dividend yield can sell the January 2020 covered call at the $140 strike and collect the premium based on the $3.85 bid, which annualizes to an additional 2.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.1% annualized rate in the scenario where the stock is not called away. Any upside above $140 would be lost if the stock rises there and is called away, but CVX shares would have to advance 18.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 21.4% return from this trading level, in addition to any dividends collected before the stock was called.