ARE August 15th Options Begin Trading

Analysis of Alexandria Real Estate Equities Inc (ARE) options reveals potential strategies for investors. Selling a $65 put contract offers a 9% discount to the current share price with a 73% chance of expiring worthless, yielding a 0.77% return on cash commitment (4.84% annualized). Selling a $72.50 covered call, 1% above the current price, provides a 2.32% return if the stock is called away, with a 53% chance of expiring worthless for a 1.19% return (7.46% annualized); implied volatilities are 44% and 32% for the put and call, respectively, compared to a trailing 12-month volatility of 30%.

Analysis

The article outlines two specific options strategies for Alexandria Real Estate Equities Inc (ARE), which is currently trading at $71.69 per share. Selling a $65.00 strike put contract, with a current bid of 50 cents, presents an opportunity to potentially acquire ARE shares at an effective cost basis of $64.50, representing an approximate 9% discount to the current share price. Alternatively, if this put contract expires worthless, which analytical data suggests has a 73% probability, the seller would realize a 0.77% return on the cash commitment, or a 4.84% annualized YieldBoost. The implied volatility for this put option is 44%. On the call side, an investor holding ARE shares could sell a $72.50 strike call contract, with a current bid of 85 cents. This covered call strategy offers a potential total return of 2.32% if the stock is called away at the August 15th expiration. If the call expires worthless, an outcome with a 53% assessed probability, the investor retains the shares and the premium, generating a 1.19% YieldBoost, or 7.46% annualized. The implied volatility for this call option is 32%. Notably, both implied volatilities (44% for the put and 32% for the call) are above ARE's actual trailing twelve-month volatility of 30%, suggesting that option sellers are currently receiving a premium that reflects expectations of higher future price swings than observed historically, particularly for the puts.

Key Decisions for Investors

• Investors bullish on ARE but seeking a lower entry point could consider selling the $65.00 put, aiming for an effective purchase price of $64.50 or a 4.84% annualized yield if the option expires worthless, while noting the 73% probability of the latter.
• Existing ARE shareholders or those initiating a position at $71.69 might evaluate selling the $72.50 covered call to generate a potential 7.46% annualized yield if the option expires worthless (53% probability), or achieve a 2.32% return if called away, understanding this caps upside potential.
• Investors should note the elevated implied volatilities (44% for the put, 32% for the call) relative to ARE's 30% historical volatility, which may present attractive premium-selling opportunities, especially for the put options.