And, of course, the more protection you choose the less
call premium yield you will receive.
For example, here are two chocies for CTL along with their respective downside protections provided by the call option, as well as the annualized
call premium yields:
Not exact matches
Investors will realize a slightly higher
yield if the
called bonds are paid off at a
premium.
A
yield spread
premium, also
called a YSP or rebate, is a fee paid to brokers by wholesale lenders for bringing your loan to them.
This means that, even in the worst - case scenario, the merger would
yield an approximate 65 %
premium to Avigen's stock price before we submitted our request to the Company to
call the special meeting.
The opposite condition,
called backwardation, is profitable and happens when there is a shortage so there is no value to storage, and a
premium,
called convenience
yield, is put on owning the commodity immediately.
Normally we try to get 2x to 2.5 x the dividend
yield in
call premium.
The combination of
yield plus
call premium is almost 10 % per year after fees.
Losing covered
call strategies include chasing high
yields by buying stocks you don't want to own if not
called, as well as buying stocks that don't pay enough in
call premium to compensate you for the risk of owning them.
The combination of
call premium plus dividend
yield is one of the more popular investment strategies as an alternative to low -
yielding treasury rates.
Generally, for a typical 3 - 5 % dividend
yield large cap stock, you can get at least as much from the
call premium as you earn from the dividend (effectively doubling the dividend).
If you wanted a little more
call premium you could sell the 28 strike instead of the 27 strike, and get 7.3 % annualized
yield from the
call premium, plus the 8.4 % dividend for a total
yield over 15 %.
The difference in prices and
yields is
called the liquidity
premium.
Using a venerable actuarial tool
called the Linton
Yield Method, these returns are derived by comparing the cash value policy to the alternative of buying lower
premium term life insurance and investing the
premium savings in a hypothetical alternative investment, such as a bank account or a mutual fund.
Better option
premiums and
yields, combined with struggling equities and rising bond
yields means now could potentially be the time for covered
calls.
The options
yield over 10 % / year in
call premium income.
There is nothing more satisfying than getting
yield and
call premiums, even if stocks move sideways.
The Motley Fool had a recent article on using covered
calls on CPG (Crescent Point Energy Corp) to create a 13.9 %
yield that combines its 2.8 % dividend
yield with
call option
premium.
Many of these high
yielding «dogs» offer good
call premium.
The combination of dividends and
call premium will
yield 10 % returns + / - whatever happens to the stock.
Combining the
call premium with the dividend
yield is a good way to substitute high stock
yield for low
yield bonds.
Mortgage brokers typically earn their commission on what is
called a
yield spread
premium (YSP).
You can even find better prices when you book in advance as once the resorts reach a certain occupancy level they then put in place «
yield management» and the prices begin to increase as the occupancy increases over the busy peak periods and they then charge what is
called a «rack rate» or
premium rate
Prepayment
Premium - Our promissory note provides for a
yield maintenance prepayment
premium running to the
Call Date or Maturity Date (as applicable).
Using a venerable actuarial tool
called the Linton
Yield Method, these returns are derived by comparing the cash value policy to the alternative of buying lower
premium term life insurance and investing the
premium savings in a hypothetical alternative investment, such as a bank account or a mutual fund.