YieldBoost Red Rock Resorts To 14.9% Using Options
August 21, 2024 at 11:39 AM EDT
Shareholders of Red Rock Resorts Inc (RRR) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the January 2025 covered call at the $60 strike and collect the premium based on the $3.00 bid, which annualizes to an additional 13.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.9% annualized rate in the scenario where the stock is not called away. Any upside above $60 would be lost if the stock rises there and is called away, but RRR shares would have to climb 7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 12.4% return from this trading level, in addition to any dividends collected before the stock was called.