Investors in the Select Sector SPDR Trust – State Street Technology Select Sector SPDR ETF (Symbol: XLK) can now trade new options with a July 10th expiration. Notably, a put contract at a $176.00 strike price is currently bid at $3.35, allowing investors to potentially purchase shares at a cost basis of $172.65, compared to the current market price of $185.94. This offers about a 5% discount, with a 70% chance of the put expiring worthless, yielding a 1.90% return on cash commitment, or 16.16% annualized.
On the call options side, a $187.00 strike priced contract is being bid at $5.80. If investors buy shares at $185.94 and sell this covered call, they could see a total return of 3.69% if the stock is called away by the expiration date. This strike price reflects a 1% premium above the current trading price, with a 53% probability of expiring worthless, potentially providing an additional 3.12% return or 26.48% annualized.
The implied volatilities for both options are approximately 30%, while the actual trailing twelve-month volatility stands at 21%.
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