New Opportunities Arise for Investors
Investors engaging with Philip Morris International Inc (Symbol: PM) witnessed the commencement of trading for new options today, specifically for the June 2025 expiration. With 483 days remaining until expiration, the freshly minted contracts hold allure for sellers of puts or calls aiming for a richer premium compared to nearer expiration contracts. Stock Options Channel, utilizing its YieldBoost formula, meticulously scrutinized the PM options chain for the novel June 2025 contracts and zeroed in on one put and one call contract that piqued interest.
Dive into the Put and Call Contracts
A put contract at the $90.00 strike price garnered attention with a current bid of $6.70. Opting to sell-to-open this put contract entails committing to procuring the stock at $90.00, offset by collecting the premium. This positions the cost basis of the shares at a revised $83.30, precluding broker commissions. Such a move could entice investors seeking to acquire PM shares, offering an alternative to the current $91.79/share price tag.
What Lies Beyond? By holding a $90.00 strike, representing a marginal 2% markdown from the prevailing trading price of the stock, the put contract might dwindle into worthlessness upon expiration. Present analytical data, encompassing greeks and implied greeks, place the odds of such an eventuality at a towering 99%. Stock Options Channel will meticulously monitor these odds over time, disseminating a chart on its website under the contract detail page. Should the contract expire unexercised, the premium would deliver a robust 7.44% return on the cash commitment, equivalent to a 5.63% annualized return – aptly dubbed as the YieldBoost.
Meanwhile, on the calls side, a call contract at the $100.00 strike price fetched a current bid of $3.00. Envision an investor purchasing PM shares at the existing price point of $91.79/share and proceeding to sell-to-open the call contract, essentially engaging in a “covered call” strategy, pledging to vend the stock at $100.00. Such a maneuver could yield a total return of 12.21% (exclusive of dividends, if any) if the stock transitions by the June 2025 expiration (excluding broker commissions).
Strategic Analysis and Risk Assessment
Contemplating a covered call strategy requires prudence, as significant upside potential might remain unexplored if PM shares soar. Delving into PM’s twelve-month trading history and fundamental business assessments becomes imperative. The $100.00 strike, portraying a rough 9% premium over the current trading price, could potentially lead to an expired covered call, whereby the investor retains both the stock and the premium collected. The prevailing analytical data gauges the likelihood of expiration sans exercise at 99%. Over time, Stock Options Channel will track these odds, issuing charts displaying the progression. Should the covered call lapse worthless, the premium would furnish an additional 3.27% return to the investor or a 2.47% annualized yield, known as the YieldBoost.
Volatility and Prospect
Factoring the actual trailing twelve-month volatility, considering the last 251 trading day closing values alongside today’s price of $91.79, computes at 17%. For more put and call options contract insights worthy of exploration, a visit to StockOptionsChannel.com could be worthwhile.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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