How To YieldBoost TT From 1% To 7.8% Using Options

Shareholders of Trane Technologies plc (TT) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the December covered call at the $360 strike and collect the premium based on the $13.10 bid, which annualizes to an additional 6.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.8% annualized rate in the scenario where the stock is not called away. Any upside above $360 would be lost if the stock rises there and is called away, but TT shares would have to climb 10.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14.3% return from this trading level, in addition to any dividends collected before the stock was called.