IBB Dividend Type Payments

iShares NASDAQ BIOTECH E dividend

Although IBB has no upcoming (meaning, Board-approved and announced) dividends, you can sell covered calls on iShares NASDAQ BIOTECH E to create 12 extra dividend type payments per year to boost its yield. Let's look at some recent prices (last updated Mon 4:16 PM ET):

iShares NASDAQ BIOTECH E (IBB)
Bid Ask Last Change Volume P/E Market Cap
115.76 116.40 116.09 -0.20 1.0M - 89B

IBB Dividend-Like Income Using Covered Calls

With IBB at 116.09, here's a table showing how big the annual "dividend" (ie. total annual call premium received) would need to be to attain 3%, 5%, and 10% annual yields. Also shown is the equivalent number of cents/day necessary to achieve each yield:

Annual Yield Annual Premium Cents/Day
3% 3.48 1.0
5% 5.80 1.6
10% 11.61 3.2

So now we need to find out of the money covered calls that pay at least the prescribed cents/day amount of time premium. That will generate income and, because they are out of the money, leave room for some upside potential on the stock. Here are some examples:

3% Yield On IBB Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Aug 24 118.50 0.05 5 1.0 2.10 (1.8%)
Aug 31 119.50 0.15 12 1.3 3.10 (2.7%)
5% Yield On IBB Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Aug 24 118.00 0.15 5 3.0 1.60 (1.4%)
Aug 31 119.00 0.25 12 2.1 2.60 (2.2%)
10% Yield On IBB Using Covered Calls
Expiration Strike Call Bid Days Cents/Day Upside Potential
Aug 24 117.50 0.25 5 5.0 1.10 (0.9%)
Aug 31 118.00 0.50 12 4.2 1.60 (1.4%)

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Want more examples? IAU Dividend | IBCD Dividend