How To YieldBoost ROP To 0.8% Using Options
March 20, 2024 at 12:03 PM EDT
Shareholders of Roper Technologies Inc (ROP) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the December covered call at the $800 strike and collect the premium based on the $1.10 bid, which annualizes to an additional 0.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 0.8% annualized rate in the scenario where the stock is not called away. Any upside above $800 would be lost if the stock rises there and is called away, but ROP shares would have to climb 44.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 44.6% return from this trading level, in addition to any dividends collected before the stock was called.