Investors in the Select Sector SPDR Trust – State Street Energy Select Sector SPDR ETF (XLE) began trading new options today for the October 2nd expiration. Two notable contracts are a put at the $59.50 strike price, with a current bid of $0.50, and a call at the $62.50 strike price, also with a current bid of $0.50.
The put contract represents a commitment to purchase shares at $59.50, effectively lowering the cost basis to $59.00 after accounting for the premium. Current analytical data shows a 62% probability that this contract may expire worthless. Conversely, the call contract entails a commitment to sell shares at $62.50, offering a potential total return of 4.30% if the stock is called away. The estimated odds of this contract expiring worthless are 56%.
The current market price of XLE is $60.40, reflecting a 3% and 1% out-of-the-money status for the call and put contracts, respectively. The implied volatility for the put is 32%, while it is 28% for the call.
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