Investors in the Select Sector SPDR Trust – State Street Energy Select Sector SPDR ETF (XLE) now have new options available for the June 5th expiration. A notable put contract at a $55.00 strike price has a current bid of $1.06, effectively lowering the cost basis of XLE shares to $53.94 if sold-to-open. This represents an approximate 3% discount to XLE’s current trading price of $56.75, with a 66% probability of the contract expiring worthless.
On the call side, a call contract at a $62.50 strike price is priced at 12 cents. Selling this covered call while holding shares at $56.75 could yield a total return of 10.34% if called away at expiration, although there remains a 71% chance it could also expire worthless. The implied volatility for the put is 28%, while the call’s is 42%, compared to the actual trailing twelve-month volatility of 20%.
