Strategy To YieldBoost Travelers Companies From 2.2% To 11% Using Options

Shareholders of Travelers Companies Inc (TRV) looking to boost their income beyond the stock's 2.2% annualized dividend yield can sell the June 2022 covered call at the $160 strike and collect the premium based on the $10.30 bid, which annualizes to an additional 8.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11% 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 TRV shares would have to climb 1.8% from current levels for that to occur, 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.