How To YieldBoost MGP Ingredients From 0.5% To 12.4% Using Options

Shareholders of MGP Ingredients Inc (MGPI) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the December covered call at the $100 strike and collect the premium based on the $3.50 bid, which annualizes to an additional 11.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.4% annualized rate in the scenario where the stock is not called away. Any upside above $100 would be lost if the stock rises there and is called away, but MGPI shares would have to advance 11.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15% return from this trading level, in addition to any dividends collected before the stock was called.