Investors in British American Tobacco plc (BTI) have access to new options expiring in December 2027, offering potential for higher premiums due to the 504-day expiration period. A noteworthy put contract at a $55.00 strike price has a current bid of $2.50, making the effective cost basis for shares $52.50, which is a 10% discount from the current trading price of $61.15. The odds of this contract expiring worthless stand at 67%, with a potential yield of 4.55% on the cash commitment.
Additionally, a call contract at a $70.00 strike price is available with a current bid of $1.00. If an investor sells this contract while purchasing shares at the current price, they could see a total return of 16.11% if the stock is called away at expiration. The likelihood of this call contract expiring worthless is estimated at 68%, offering a 1.64% extra return if it does not get exercised. Implied volatility for both contracts is approximately 27%.
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