How To YieldBoost Shutterstock From 0.7% To 6.9% Using Options
October 20, 2021 at 11:48 AM EDT
Shareholders of Shutterstock Inc (SSTK) looking to boost their income beyond the stock's 0.7% annualized dividend yield can sell the May 2022 covered call at the $160 strike and collect the premium based on the $4.50 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 6.9% annualized rate in the scenario where the stock is not called away. Any upside above $160 would be lost if the stock rises there and is called away, but SSTK shares would have to advance 29.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 33.1% return from this trading level, in addition to any dividends collected before the stock was called.