YieldBoost SAFE To 21.8% Using Options
July 02, 2024 at 12:25 PM EDT
Shareholders of Safehold Inc (SAFE) looking to boost their income beyond the stock's 3.8% annualized dividend yield can sell the October covered call at the $20 strike and collect the premium based on the $1.00 bid, which annualizes to an additional 18% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 21.8% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but SAFE shares would have to climb 6.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 12.1% return from this trading level, in addition to any dividends collected before the stock was called.