American Express Options Unveiled: Insights for Investors

Today, American Express Co. (Symbol: AXP) introduced new options set to expire on May 30th. At Stock Options Channel, we utilized our YieldBoost formula to analyze the AXP options chain, highlighting one put and one call contract of particular significance.

Put Options Analysis

One noteworthy put contract is available at the $245.00 strike price, currently bidding at $9.70. If an investor opts to sell-to-open this put contract, they agree to purchase shares of AXP at $245.00. However, they will also collect the premium, resulting in a net cost basis of $235.30 (before broker commissions). For those looking to acquire shares of AXP, this presents a compelling alternative to buying at the current price of $249.73 per share.

This $245.00 strike reflects approximately a 2% discount from the current trading price, meaning it’s out-of-the-money by that percentage. Data indicates a 63% likelihood that the put contract could expire worthless. We will monitor these odds over time, updating our website with relevant charts under the contract detail page for this option. Should the put expire worthless, the premium collected would yield a 3.96% return on the cash commitment, equating to an annualized rate of 28.90%, a figure we term the YieldBoost.

Chart of Trading History

Below is a chart displaying the trailing twelve-month trading history of American Express Co., with the $245.00 strike price marked in green for context:

Call Options Analysis

Shifting our focus to the calls side, a call contract is available at the $260.00 strike price, currently bidding at $11.20. An investor who buys AXP shares at today’s price of $249.73 and sells-to-open this call as a “covered call” would commit to selling the stock at $260.00. If the stock is called away at the May 30th expiration, the investor would secure a total return of 8.60%, excluding any dividends and broker commissions. However, this strategy might limit potential upside if AXP shares experience significant appreciation, making it essential to evaluate both trading history and business fundamentals.

Here’s a chart showing AXP’s trading history over the past twelve months, with the $260.00 strike price highlighted in red:

The $260.00 strike price represents about a 4% premium relative to the current trading price, indicating a possibility that this covered call could also expire worthless. Current analysis suggests a 52% chance of this outcome. Over time, we will track these probabilities and publish a chart of the relevant trading history on our website. Should the covered call expire worthless, the premium collected would result in an additional return of 4.48%, yielding an annualized rate of 32.74%, also designated as the YieldBoost.

Volatility Analysis

The implied volatility for the put contract stands at 45%, while for the call contract, it is at 41%. In comparison, the actual trailing twelve-month volatility, derived from the last 251 trading day closings alongside today’s price of $249.73, is calculated to be 31%. For further insights and additional put and call options worth considering, visit StockOptionsChannel.com.

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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.