Investors considering Brown-Forman Corp. (Symbol: BF.B) may find selling puts an attractive alternative to buying shares at the current market price of $25.82. A noteworthy option is the December put with a $22.50 strike, currently offering a bid of $1.00, representing a 4.4% return based on commitment, equating to an 8.8% annualized return.
Should the price drop 12.7% to $22.50, the put seller’s cost basis would be $21.50 per share, before commissions. This annualized return exceeds Brown-Forman’s dividend yield of 3.5% by 5.3%, highlighting the potential risk of price depreciation if shares were purchased solely for dividends.
Brown-Forman’s trailing twelve-month volatility is calculated at 37%, suggesting a careful analysis of historical trends could determine if the 8.8% annualized return from selling the put is a worthwhile strategy given the market’s fluctuations.
