YieldBoost AMSWA To 27.7% Using Options

Shareholders of American Software Inc (AMSWA) looking to boost their income beyond the stock's 4.2% annualized dividend yield can sell the June covered call at the $12.50 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 23.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 27.7% annualized rate in the scenario where the stock is not called away. Any upside above $12.50 would be lost if the stock rises there and is called away, but AMSWA shares would have to advance 20.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 21.3% return from this trading level, in addition to any dividends collected before the stock was called.