Shareholders of HCI Group Inc (HCI) looking to boost their income beyond the stock's 1.1% annualized dividend yield can sell the November covered call at the $150 strike and collect the premium based on the $10.50 bid, which annualizes to an additional 19% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 20.1% annualized rate in the scenario where the stock is not called away. Any upside above $150 would be lost if the stock rises there and is called away, but HCI shares would have to advance 5.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 13% return from this trading level, in addition to any dividends collected before the stock was called.

Read full article here »