Investors in Diageo plc (Symbol: DEO) saw new options trading begin today, with contracts set to expire in January 2028. Notably, a put option with a $70.00 strike price is currently bid at $8.60, allowing investors interested in acquiring shares at today’s price of $74.03 to lower their effective cost basis to $61.40, assuming they sell to open the put contract. This represents a discount of approximately 5% to the current trading price and has a 66% chance of expiring worthless.
On the call side, a contract at the $75.00 strike price is bid at $10.90. If an investor sells this covered call while owning shares at $74.03, they could achieve a total return of 16.03% if the call is exercised by January 2028. However, there is a 45% probability that the call will expire worthless, which would allow the investor to retain both the shares and the premium, yielding a 14.72% return, or 8.13% annualized.
Implied volatilities for the put and call options are 35% and 36%, respectively, while Diageo’s trailing twelve-month volatility is calculated at 33%.
