Buyers eyeing a purchase order of AutoZone, Inc. (Image: AZO) shares, however tentative about paying the going market worth of $3403.93/share, would possibly profit from contemplating promoting places among the many various methods at their disposal. One attention-grabbing put contract particularly, is the December put on the $3000 strike, which has a bid on the time of this writing of $100.00. Amassing that bid because the premium represents a 3.3% return in opposition to the $3000 dedication, or a 3.7% annualized charge of return (at Inventory Choices Channel we name this the YieldBoost).
Promoting a put doesn’t give an investor entry to AZO’s upside potential the way in which proudly owning shares would, as a result of the put vendor solely finally ends up proudly owning shares within the situation the place the contract is exercised. And the particular person on the opposite facet of the contract would solely profit from exercising on the $3000 strike if doing so produced a greater final result than promoting on the going market worth. (Do options carry counterparty risk? This and six other common options myths debunked). So until AutoZone, Inc. sees its shares fall 12.7% and the contract is exercised (leading to a value foundation of $2900.00 per share earlier than dealer commissions, subtracting the $100.00 from $3000), the one upside to the put vendor is from accumulating that premium for the three.7% annualized charge of return.
Under is a chart exhibiting the trailing twelve month buying and selling historical past for AutoZone, Inc., and highlighting in inexperienced the place the $3000 strike is positioned relative to that historical past:
The chart above, and the inventory’s historic volatility, could be a useful information together with basic evaluation to guage whether or not promoting the December put on the $3000 strike for the three.7% annualized charge of return represents good reward for the dangers. We calculate the trailing twelve month volatility for AutoZone, Inc. (contemplating the final 249 buying and selling day closing values in addition to at present’s worth of $3403.93) to be 21%. For different put choices contract concepts on the varied completely different out there expirations, go to the AZO Stock Options web page of StockOptionsChannel.com.
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
