YieldBoost Extra Space Storage From 3.6% To 23.1% Using Options
September 18, 2024 at 11:40 AM EDT
Shareholders of Extra Space Storage Inc (EXR) looking to boost their income beyond the stock's 3.6% annualized dividend yield can sell the December covered call at the $185 strike and collect the premium based on the $9.00 bid, which annualizes to an additional 19.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 23.1% annualized rate in the scenario where the stock is not called away. Any upside above $185 would be lost if the stock rises there and is called away, but EXR shares would have to advance 2.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 7.1% return from this trading level, in addition to any dividends collected before the stock was called.