New Options for Occidental Petroleum Offer Attractive Strategies

Investors in Occidental Petroleum Corp (Symbol: OXY) gained access to new options today, expiring on October 17th. With 136 days until expiration, these options offer potential for selling puts or calls at higher premiums than contracts with closer expiration dates.

The put contract at the $40.00 strike price currently has a bid of $2.41. By selling-to-open this put contract, an investor commits to buy shares at $40.00 while collecting the premium. This reduces the effective cost basis to $37.59 per share, presenting a cost-effective alternative to buying shares at the current price of $41.83.

The $40.00 strike price offers about a 4% discount from the current trading price, making the option out-of-the-money. Current analysis indicates a 64% chance of the option expiring worthless. If that occurs, the premium would yield a 6.03% return on the cash commitment, equating to a 16.17% annualized return.

Below is a chart displaying Occidental Petroleum’s trailing twelve-month trading history, with the $40.00 strike indicated in green:

On the call side, the $42.50 strike contract has a current bid of $3.20. An investor purchasing OXY shares at $41.83 and selling this call as a covered call would commit to sell shares at $42.50. Including the premium, this position could yield a total return of 9.25% if the stock is called away at expiration.

The $42.50 strike price is approximately 2% above the current trading price, making it out-of-the-money. There is a 47% chance that this covered call may also expire worthless, allowing the investor to retain both the shares and the premium collected. If that happens, the premium would represent a 7.65% additional return, or 20.53% annualized.

The implied volatility for the put contract is 36%, while for the call contract, it is 34%. The actual trailing twelve-month volatility, based on the last 250 trading days and today’s price of $41.83, is calculated at 34%.

For further options insights, visit StockOptionsChannel.com.