November 7th Options Now Available For Cameco (CCJ)

This analysis details two options-based strategies for Cameco Corp. (CCJ) at its current $84.19 price: selling a $78.00 strike put, offering a potential 27.72% annualized return if it expires worthless (63% probability) and a lower effective entry price, or executing a covered call with a $90.00 strike, yielding a 9.41% total return if exercised or a 21.25% annualized boost if it expires worthless (66% probability). These strategies leverage implied volatilities of 53-57%, which are slightly above CCJ's 47% trailing 12-month actual volatility.

Analysis

Options markets for Cameco Corp. (CCJ), currently trading at $84.19, indicate that implied volatility (53-57%) is elevated compared to its trailing twelve-month actual volatility of 47%. This premium presents opportunities for income-generating strategies. Selling the $78.00 strike put contract, for instance, offers a way to collect a $2.55 premium, effectively lowering the cost basis to $75.45 if assigned. This strategy has a 63% probability of expiring worthless, which would result in a 3.27% return on the cash commitment, or an annualized 27.72%. Alternatively, for existing shareholders, selling a covered call at the $90.00 strike generates a $2.11 premium. If CCJ's price rises above $90.00 and the shares are called away, the total return would be 9.41%. There is a 66% probability of this call expiring worthless, in which case the premium provides a 2.51% return boost, translating to a 21.25% annualized yield.

Key Decisions for Investors

• Investors bullish on CCJ but seeking a better entry point could consider selling the $78.00 cash-secured put to either acquire the stock at an effective cost basis of $75.45 or generate a 27.72% annualized yield.
• Current CCJ shareholders looking to generate income may find the covered call strategy at the $90.00 strike attractive, as it offers a 21.25% annualized yield boost, but they must accept a capped total return of 9.41% if the stock is called away.
• Given that implied volatility is trading at a premium to historical volatility, option-selling strategies are currently more advantageous for premium sellers than option buyers.