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Strategy To YieldBoost JPMorgan Chase From 2.8% To 5.5% Using Options

Shareholders of JPMorgan Chase & Co (Symbol: JPM) looking to boost their income beyond the stock's 2.8% annualized dividend yield can sell the January 2016 covered call at the $65 strike and collect the premium based on the $2.21 bid, which annualizes to an additional 2.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost ), for a total of 5.5% annualized rate in the scenario where the stock is not called away. Any upside above $65 would be lost if the stock rises there and is called away, but JPM shares would have to climb 13.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 17.2% return from this trading level, in addition to any dividends collected before the stock was called.

In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of JPMorgan Chase & Co, looking at the dividend history chart for JPM below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 2.8% annualized dividend yield.

Top YieldBoost Calls of the Dow »

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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