August 15th Options Now Available For Waste Connections (WCN)

The article from Stock Options Channel discusses potential options strategies for Waste Connections Inc (WCN). Selling a $180 put offers a 0.81% return if it expires worthless, with a 70% probability based on current data, while a covered call strategy at the $190 strike yields 3.49% if the stock is called away, or a 1.82% return if it expires worthless, with a 53% probability; the implied volatility for the put and call options are 23% and 21% respectively, while the trailing twelve month volatility is 17%.

Analysis

The article details two options strategies for Waste Connections Inc. (WCN), currently trading at $186.87 per share. Selling the $180.00 strike put contract, with a bid of $1.45, offers an investor the potential to acquire shares at an effective cost basis of $178.55, representing an approximate 4% discount to the current price. There is a 70% estimated probability of this out-of-the-money put expiring worthless, which would yield a 0.81% return on the cash commitment, or 5.07% annualized. Alternatively, for existing WCN shareholders, selling the $190.00 strike call option at a $3.40 bid as a covered call could generate a total return of 3.49% if the stock is called away by the August 15th expiration. This strike is roughly 2% out-of-the-money, and there's a 53% estimated chance it expires worthless, in which case the premium would provide a 1.82% yield boost, or 11.45% annualized. The implied volatility for the put is 23% and for the call is 21%, compared to WCN's actual trailing twelve-month volatility of 17%, indicating that options are pricing in somewhat higher future price swings than recently observed.

Key Decisions for Investors

• Investors seeking to acquire Waste Connections Inc. (WCN) shares at a discount to the current $186.87 price could consider selling the $180 put option, targeting an effective entry price of $178.55 or a 5.07% annualized yield if the option expires worthless, noting the 70% probability of this scenario.
• Existing WCN shareholders could evaluate writing the $190 strike covered call to potentially generate a 3.49% return if the stock is called away by August 15th, or an 11.45% annualized yield if the option expires worthless (53% probability), but should be mindful of capping upside potential above the $190 strike price.
• Consider that the options' implied volatilities (21-23%) are moderately higher than the stock's 17% trailing historical volatility, suggesting that premiums for selling these options might offer reasonable compensation for the associated risks and reflect market expectations of increased volatility.