Investors in Canadian Pacific Kansas City Ltd (CP) can now explore new options expiring on November 20, 2023. The available contracts include a put at an $85.00 strike price, currently bid at $2.95, allowing sellers to commit to buying shares at an effective cost basis of $82.05. This offers a discount of approximately 1% from CP’s current trading price of $85.92, with a 60% chance of the put expiring worthless, potentially yielding a 3.47% return on cash commitment.
Additionally, a call option at a $87.50 strike price is available, currently bid at $3.70. If executed, this would commit the investor to sell shares at $87.50, resulting in a total return of 6.15% if the option is exercised by expiration. This strike price is roughly 2% above the current price, with a 47% chance of expiring worthless, offering a possible additional return of 4.31% if retained.
The implied volatility for the put is 25% and for the call is 23%, compared to the trailing twelve-month volatility of 22%.
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