Investors in the Select Sector SPDR Trust – State Street Utilities Select Sector SPDR ETF (XLU) have new options available for the October 16th expiration. A notable put contract at the $44.00 strike price is trading at a current bid of $0.30, allowing investors to acquire shares at an effective cost basis of $43.70—approximately 1% lower than the current trading price of $44.47. Analysts suggest a 58% chance that this put contract may expire worthless.
On the call side, a contract at the $45.00 strike price is trading at $0.59. If investors purchase XLU shares at $44.47 and sell this call as a “covered call,” they could achieve a total return of 2.52% if the stock is called away at expiration. Current odds indicate a 51% chance that this call could expire worthless, allowing investors to keep both the shares and the premium collected. The implied volatilities for these contracts are 28% and 27%, respectively.
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