Investors in Canadian Pacific Kansas City Ltd (CP) have new options available with an expiration date of August 21st. Notably, the put contract at the $85.00 strike price is currently bid at $1.30, presenting an opportunity to purchase shares at an effective cost basis of $83.70, compared to the current trading price of $86.50. This represents approximately a 2% discount. The odds of this contract expiring worthless are estimated at 60%, offering a potential 1.53% return on the cash commitment, or 6.13% annualized.
On the call side, the $87.50 strike call contract has a current bid of $2.30. If an investor buys shares at $86.50 and sells this call, they could achieve a total return of 3.82% at expiration, excluding dividends. This strike price is about 1% above the current trading price. The odds of the covered call expiring worthless are estimated at 49%, potentially yielding a 2.66% return, or 10.67% annualized. Implied volatility for both the put and call contracts stands at approximately 26%.
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