How To YieldBoost Caledonia Mining To 13.5% Using Options

Shareholders of Caledonia Mining Corporation PLC (CMCL) looking to boost their income beyond the stock's 5.9% annualized dividend yield can sell the December covered call at the $12.50 strike and collect the premium based on the 35 cents bid, which annualizes to an additional 7.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.5% 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 CMCL shares would have to advance 31% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 34.7% return from this trading level, in addition to any dividends collected before the stock was called.