Strategy To YieldBoost LNT To 7.8% Using Options

Shareholders of Alliant Energy Corp (LNT) looking to boost their income beyond the stock's 3.3% annualized dividend yield can sell the July covered call at the $65 strike and collect the premium based on the $1.15 bid, which annualizes to an additional 4.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.8% annualized rate in the scenario where the stock is not called away. Any upside above $65 would be lost if the stock rises there and is called away, but LNT shares would have to advance 6.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.3% return from this trading level, in addition to any dividends collected before the stock was called.