Strategy To YieldBoost RCI Hospitality Holdings From 0.5% To 16.3% Using Options

Shareholders of RCI Hospitality Holdings Inc (RICK) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the November covered call at the $55 strike and collect the premium based on the $4.30 bid, which annualizes to an additional 15.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.3% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but RICK shares would have to advance 7.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15.6% return from this trading level, in addition to any dividends collected before the stock was called.