With shares trading near my purchase price of $77.15, it seemed like a good time to make a new high-yield trade with Walgreens Boots Alliance (WBA).
On Monday I sold one January 25, 2019 $78.50 call option for $3.00 per share.[hana-code-insert name=’adsense-article’ /]I sold this call on the 100 shares I originally purchased at $77.15 per share during a high-yield trade I made back in October 2017.
That call option expired in November 2017, so my latest trade simply involves selling another call on these same 100 shares.
Every time you’re able to sell an option like this, you generate additional income.
There are likely two ways this new trade will work out — and they both spell outsized annualized yields.
Scenario #1: WBA stays under $78.50 by January 25, 2019
If WBA stays under $115 by January 18, I’ll get to keep my 100 shares.
In the process, I’ll also have received $300 in call income ($3.00 x 100 shares).[hana-code-insert name=’adsense-article’ /]The call income — known as a “premium” in the options world — was collected Monday.
It was deposited in the account where I made the trade, which is my 401k retirement account.
At the end of the day, if “Scenario 1″ plays out I’ll be looking at $294.40 in profit after commissions.
On a percentage basis, I received an instant 3.9% yield for selling the call ($3.00 / $77.15).
When I subtract out the commissions I’m looking at a 3.8% yield in 39 days… which works out to a 35.7% annualized yield.
Scenario #2: WBA climbs over $78.50 by January 25, 2019
If WBA climbs over $78.50 by January 25, my 100 shares will get sold (“called away”) at $78.50 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $300 in call income ($3.00 x 100 shares). I’ll also generate $135 in capital gains ($1.35 X 100) because I bought at $77.15 and will be selling at $78.50.
In this scenario, after commissions I’ll be looking at a $424.45 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 3.9% yield for selling the call ($3.00 / $77.15) and a 1.7% gain ($1.35 / $77.15).
After subtracting out the commissions, I’m looking at a 5.5% total return in 39 days.
That works out to a 51.5% annualized yield from WBA.
P.S. The reason I’ve gone public with many of my real-life, real-money “High-Yield Trades” is so you can see for yourself how entirely possible it is to boost your annualized yield on high-quality dividend growth stocks. Just keep in mind that these trades aren’t intended to be specific recommendations for you as an individual. Everyone has different financial situations, risk tolerance, goals, time frames, etc.[hana-code-insert name=’MMPress’ /]