YieldBoost Exxon Mobil Corp. To 5.2% Using Options

Shareholders of Exxon Mobil Corp. (NYSE: XOM) looking to boost their income beyond the stock's 3.4% annualized dividend yield can sell the January 2017 covered call at the $95 strike and collect the premium based on the $2.44 bid, which annualizes to an additional 1.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.2% annualized rate in the scenario where the stock is not called away. Any upside above $95 would be lost if the stock rises there and is called away, but XOM shares would have to advance 11.4% 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.

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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 Exxon Mobil Corp., looking at the dividend history chart for XOM 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 3.4% annualized dividend yield.

Below is a chart showing XOM's trailing twelve month trading history, with the $95 strike highlighted in red:

Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Exxon Mobil Corp. (considering the last 254 trading day closing values as well as today's price of $85.14) to be 18%. For other call options contract ideas at the various different available expirations, visit the Find out which 15 call and put options traders are talking about today.