Strategy To YieldBoost PFS To 39.6% Using Options

Shareholders of Provident Financial Services Inc (PFS) looking to boost their income beyond the stock's 6.9% annualized dividend yield can sell the April covered call at the $17.50 strike and collect the premium based on the 5 cents bid, which annualizes to an additional 32.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 39.6% annualized rate in the scenario where the stock is not called away. Any upside above $17.50 would be lost if the stock rises there and is called away, but PFS shares would have to climb 25.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 25.7% return from this trading level, in addition to any dividends collected before the stock was called.