Strategy To YieldBoost MSCI From 1.3% To 10.5% Using Options
July 15, 2024 at 11:37 AM EDT
Shareholders of MSCI Inc (MSCI) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the December covered call at the $530 strike and collect the premium based on the $20.10 bid, which annualizes to an additional 9.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.5% annualized rate in the scenario where the stock is not called away. Any upside above $530 would be lost if the stock rises there and is called away, but MSCI shares would have to advance 5.8% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 9.8% return from this trading level, in addition to any dividends collected before the stock was called.