Strategy To YieldBoost ADEA To 16.4% Using Options

Shareholders of Adeia Inc (ADEA) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the December covered call at the $12.50 strike and collect the premium based on the 75 cents bid, which annualizes to an additional 14.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.4% 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 ADEA shares would have to advance 9.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 16.5% return from this trading level, in addition to any dividends collected before the stock was called.