Exploring Options in O’Reilly Automotive Stock Amid Market Uncertainty

Investors eyeing O’Reilly Automotive, Inc. (Symbol: ORLY) may find value in an alternative strategy as they consider the current market price of $1,365.01 per share. One noteworthy approach is selling put options, particularly the November put with a $1,330 strike price. At the time of this writing, this contract has a bid of $75.20. Collecting that premium offers a 5.7% return based on the $1,330 commitment, translating to an annualized rate of return of 10%, known as the YieldBoost in options terminology.

While selling puts can be appealing, it’s crucial to note that this strategy does not provide the potential for capital gains that owning shares affords. A seller of the put option will only receive shares if the contract is exercised. The buyer would exercise the option at the $1,330 strike price only if it is more advantageous than selling at the current market price. If O’Reilly’s stock declines by 2.7%, resulting in the exercise of the contract, the break-even cost basis becomes $1,254.80 per share (calculated by subtracting the $75.20 premium from the $1,330 strike). Thus, the only potential upside for the put seller lies in collecting the premium for a 10% annualized return.

Below is a chart showing the trailing twelve-month trading history for O’Reilly Automotive, Inc, with the $1,330 strike price highlighted in green:

The above chart, along with O’Reilly’s historical volatility, serves as valuable tools alongside fundamental analysis when assessing whether selling the November put at the $1,330 strike represents a suitable risk-reward scenario. O’Reilly’s trailing twelve-month volatility, calculated from the last 249 trading days and the current price of $1,365.01, stands at 20%. For additional ideas on put options with various expirations, check the ORLY Stock Options page at StockOptionsChannel.com.

Top YieldBoost Puts of the Nasdaq 100 »

Also see:

• Waste Management Dividend Stocks
• CFED Insider Buying
• EAR Insider Buying

The views and opinions expressed herein are the author’s and do not necessarily reflect those of Nasdaq, Inc.