Investors in BP PLC (NYSE: BP) gained access to new options for August 21, 2023, including a notable put contract at a $39.00 strike price, currently bidding at 50 cents. This offers potential buyers a chance to secure shares at a 12% discount to the current trading price of $44.30, effectively lowering their cost basis to $38.50. Odds suggest an 80% chance that the put option will expire worthless, yielding a 1.28% return on cash commitment, or 4.63% annualized.
Additionally, there’s a call contract available at a $46.00 strike price, also bidding at 50 cents. By purchasing BP shares at $44.30 and writing this covered call, investors could receive a total return of 4.97% if executed at expiration. The likelihood of this call expiring worthless is 56%, offering a potential 1.13% additional return, or 4.08% annualized. The implied volatility for the put and call contracts stands at 32% and 34%, respectively, compared to a trailing 12-month volatility of 26%.
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