New options for the Select Sector SPDR Trust – State Street Industrial Select Sector SPDR ETF (XLI) became available today, slated for expiration on October 9. Notably, a put contract at the $177.00 strike price is currently bid at $1.26, which would allow investors to purchase shares at an effective cost basis of $175.74, a 1% discount to the current trading price of $178.50.
On the call side, a contract at the $181.00 strike has a bid of $1.77. If purchased, selling this as a covered call could yield a total return of 2.39% at expiration, while also requiring investors to consider the possibility of the contract expiring worthless, currently assessed at 54% odds. The implied volatility for both put and call contracts stands at approximately 18%.
Current analytical data indicates that should the put contract expire worthless, it would represent a return of 0.71% on cash committed, or an annualized 6.04%. For the call contract, if it expires worthless, it could represent a 0.99% extra return, or an annualized 8.42%.
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