REXR November 21st Options Begin Trading

Analysis of Rexford Industrial Realty Inc. (REXR), trading at $41.00, highlights two options strategies: selling the $40.00 put and selling the $45.00 covered call. Selling the $40.00 put offers an effective acquisition cost of $38.65, or a 15.59% annualized return if the option expires worthless (58% probability). Alternatively, a covered call at the $45.00 strike provides a 10.37% total return if the stock is called away, or a 2.82% annualized yield if the option expires worthless (67% probability). Notably, implied volatility for these options is approximately 40%, exceeding REXR's 31% trailing 12-month historical volatility.

Analysis

Analysis of Rexford Industrial Realty Inc. (REXR), currently trading at $41.00 per share, centers on two specific options strategies capitalizing on its current pricing and volatility. The first strategy involves selling a cash-secured put at the $40.00 strike, which generates a premium of $1.35. This provides an opportunity to acquire the stock at an effective cost basis of $38.65, a discount to the current market price, or to realize a 15.59% annualized return on the cash commitment should the option expire worthless, an event with a 58% probability. The second strategy, a covered call for existing shareholders, involves selling the $45.00 strike call for a $0.25 premium. This strategy offers a potential total return of 10.37% if the stock is called away, or a 2.82% annualized yield boost if the option expires worthless, an outcome with a 67% probability. A key factor supporting both strategies is the divergence between the options' implied volatility of approximately 40% and the stock's trailing twelve-month historical volatility of 31%. This premium in implied volatility suggests that options are currently priced richly, making premium-selling strategies particularly advantageous.

Key Decisions for Investors

• For investors bullish on REXR but seeking a better entry point, selling the $40.00 cash-secured put offers a method to either acquire shares at an effective price of $38.65 or generate a 15.59% annualized yield on cash.
• Current REXR shareholders could consider writing covered calls at the $45.00 strike to generate a 2.82% annualized yield boost, but must be comfortable with capping their upside and potentially selling their position at an effective price of $45.25.
• Given that implied volatility at 40% is elevated compared to historical volatility of 31%, investors should favor strategies that involve selling options, such as the puts and calls discussed, to capitalize on the rich premiums currently available.