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Strategy To YieldBoost MKS Instruments To 11.8% Using Options

Shareholders of MKS Instruments Inc (MKSI) looking to boost their income beyond the stock's 0.7% annualized dividend yield can sell the July covered call at the $120 strike and collect the premium based on the $6.30 bid, which annualizes to an additional 11.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.8% annualized rate in the scenario where the stock is not called away. Any upside above $120 would be lost if the stock rises there and is called away, but MKSI shares would have to advance 9.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 15.7% return from this trading level, in addition to any dividends collected before the stock was called.
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