Generate 13.6% Returns by Committing to Buy FMC at $25 with Options Strategy

Published On: April 16, 2025 9:54 pm

Investors Weigh Selling Put Options for FMC Corp. Stock

Investors interested in FMC Corp. (Symbol: FMC) stock might consider selling puts as an alternative to directly purchasing the shares, currently priced at $37.67 each. A notable option is the January 2027 put contract with a $25 strike price, which bids at $3.40 as of this writing. By selling this put, investors could collect this premium, leading to a 13.6% return on the $25 commitment, or a 7.8% annualized rate of return—a strategy we refer to as YieldBoost.

While selling a put contract does not provide the same upside as owning shares, it presents a unique opportunity. When the contract is exercised, the seller gains ownership only if FMC’s shares fall significantly. The option to exercise would only be beneficial if it yields a better outcome than selling at the current market price. Specifically, for the option to be exercised, FMC’s share price would need to fall 33.9%, resulting in a net cost basis of $21.60 per share (factoring the premium). Otherwise, the put seller’s success lies solely in earning the premium for that 7.8% annual return.

It’s important to note that the annualized return of 7.8% surpasses FMC’s 6.2% annual dividend yield by a margin of 1.6%. Therefore, if an investor opts to buy shares for dividend income, they face a higher risk, as a 33.86% drop in stock price would be required to hit the $25 strike price.

When discussing dividends, keep in mind that these payments can fluctuate, often tied to a company’s profitability. Examining FMC Corp.’s dividend history, depicted in the chart below, can offer insights into whether the current 6.2% dividend yield is a reasonable expectation for future payouts.

FMC Dividend History Chart

The chart below outlines the trailing twelve-month trading history for FMC Corp., showing where the $25 strike price falls in relation to that history:

FMC Trading History Chart

This historical trading data, along with the stock’s volatility, can aid investors in determining whether selling the January 2027 put at the $25 strike for a 7.8% annualized return is worth the risks involved. Currently, the trailing twelve-month volatility for FMC Corp. stands at 57%, derived from the last 251 trading days leading up to today’s price of $37.67. For alternatives, explore other put options available for different expirations on the FMC Stock Options page at StockOptionsChannel.com.

As of mid-afternoon trading on Wednesday, there were 1.15 million put contracts traded among S&P 500 components, compared to 1.43 million call contracts, which gives a put-to-call ratio of 0.80. This figure is notably high against the long-term median put-to-call ratio of 0.65, indicating a greater prevalence of put buyers in today’s trading data compared to call buyers.

Explore Top YieldBoost Puts of the S&P 500