October 3rd Options Now Available For AstraZeneca (AZN)

The article details two options-based strategies for AstraZeneca (AZN), currently trading at $80.86. Investors can sell the $77.00 strike put for 58 cents, offering a potential effective purchase price of $76.42 and a 6.39% annualized return if the 69% likely scenario of the option expiring worthless occurs. Alternatively, selling the $83.00 strike covered call for 45 cents on existing AZN shares provides a 3.20% return if the stock is called away, or a 4.72% annualized premium capture if the 60% likely scenario of the option expiring worthless occurs, offering distinct income generation or discounted entry/exit points for portfolio managers.

Analysis

The provided information details two options-based strategies for AstraZeneca (AZN), which is currently trading at $80.86 per share. For investors seeking to acquire the stock at a discount, selling the $77.00 strike put contract for a 58-cent premium is presented as an alternative. This strategy establishes an effective cost basis of $76.42 if assigned, representing a 5% discount to the current market price. Analytical data suggests a 69% probability of this put expiring worthless, which would generate a 0.75% return on the cash commitment, or a 6.39% annualized yield. For existing shareholders, a covered call strategy involving the sale of the $83.00 strike call for a 45-cent premium is outlined. This could result in a 3.20% total return if the stock is called away. There is a 60% probability of the call expiring worthless, in which case the premium would provide a 4.72% annualized yield enhancement. A notable data point is the divergence in volatility metrics: the put's implied volatility is 31%, while the call's is 26%, both of which are slightly above the stock's 25% trailing twelve-month historical volatility, indicating a modest premium in options pricing, particularly for puts.

Key Decisions for Investors

• Investors bullish on AZN but seeking a lower entry point than the current $80.86 price could consider selling the $77.00 strike cash-secured put to either acquire shares at an effective cost of $76.42 or generate a 6.39% annualized yield.
• Current shareholders aiming for income generation could write the $83.00 strike covered call, which offers a potential 4.72% annualized yield enhancement but caps the total upside return at 3.20% if the stock price exceeds $83.00 by expiration.
• Given the put's implied volatility of 31% is higher than both the call's (26%) and historical volatility (25%), there appears to be a greater premium priced into downside protection, making the sale of puts a relatively more attractive strategy from a volatility risk premium perspective.