The article details two options strategies for Macy's (M) stock aimed at enhancing returns or optimizing share acquisition. Selling an $11.00 strike put, 14% out-of-the-money, offers a 17.11% annualized return if it expires worthless (79% probability), effectively setting a $10.67 acquisition cost if assigned. Alternatively, a covered call using a $13.00 strike, 2% out-of-the-money, can yield an 8.05% total return if shares are called away, or a 36.98% annualized premium boost if it expires worthless (46% probability). These "YieldBoost" strategies leverage M's implied volatilities (53% for puts, 72% for calls) against a historical volatility of 48% to generate income or acquire shares at a discount.
The article details two options-based strategies for Macy's (M), which is currently trading at $12.80 per share, focusing on income generation and discounted share acquisition. The first strategy, selling an $11.00 strike put option, offers a premium of 33 cents. This establishes a potential acquisition cost of $10.67 per share, a 14% discount to the current market price, should the option be exercised. With a 79% probability of expiring worthless, this strategy could yield a 17.11% annualized return on the cash commitment. The second strategy is a covered call at the $13.00 strike, yielding an 83-cent premium. This approach offers a total return of 8.05% if the stock is called away, but caps upside potential. If this call expires worthless, which has a 46% probability, the premium represents a 36.98% annualized return boost for the shareholder. A key factor underpinning both strategies is the elevated implied volatility (53% for the put, 72% for the call) relative to the stock's trailing twelve-month actual volatility of 48%, suggesting option premiums are currently rich compared to historical price movements.
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