How To YieldBoost Public Service Enterprise Group From 3.2% To 9.4% Using Options

Shareholders of Public Service Enterprise Group Inc (PEG) looking to boost their income beyond the stock's 3.2% annualized dividend yield can sell the December covered call at the $80 strike and collect the premium based on the $2.00 bid, which annualizes to an additional 6.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.4% annualized rate in the scenario where the stock is not called away. Any upside above $80 would be lost if the stock rises there and is called away, but PEG shares would have to advance 6.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 9% return from this trading level, in addition to any dividends collected before the stock was called.