Interesting OXY Put And Call Options For October 17th

Analysis of Occidental Petroleum (OXY) options reveals potential yield-boosting strategies for investors. Selling a $40 put offers a 6.03% return if the contract expires worthless, while a covered call strategy at $42.50 could yield 9.25% if the shares are called away; if it expires worthless, the investor would get a 7.65% boost of return. Analytical data suggests a 64% probability of the put expiring worthless and a 47% probability of the call expiring worthless.

Analysis

The provided financial article details two options-based strategies for Occidental Petroleum (OXY), which is currently trading at $41.83 per share. The first strategy involves selling a cash-secured put contract at the $40.00 strike price for a premium of $2.41. This approach could allow an investor interested in OXY to potentially acquire shares at an effective cost basis of $37.59, representing an attractive discount to the current market price. This $40.00 strike is approximately 4% out-of-the-money, and analytical data suggests a 64% probability of this put contract expiring worthless, in which case the seller would realize a 6.03% return on their cash commitment, or a 16.17% annualized YieldBoost. The second strategy is a covered call, applicable to investors already holding OXY shares. By selling a call contract at the $42.50 strike price for a $3.20 premium, investors commit to selling their shares at $42.50 if the option is exercised. This could result in a total return of 9.25% by the October 17th expiration if the stock is called away. The $42.50 strike is about 2% out-of-the-money, with a 47% probability of expiring worthless; should this occur, the investor retains their shares and the premium, achieving a 7.65% extra return, or a 20.53% annualized YieldBoost. The implied volatility for the put is 36% and for the call is 34%, which are comparable to OXY's actual trailing twelve-month volatility of 34%, suggesting option premiums are not excessively inflated relative to recent historical price movements.

Key Decisions for Investors

• Investors interested in acquiring Occidental Petroleum shares at a potential discount to the current price of $41.83 could consider selling the $40.00 strike put options, which offers an effective purchase price of $37.59 if assigned or a 16.17% annualized return on cash if the option expires worthless.
• Current Occidental Petroleum shareholders seeking to generate additional income from their holdings and willing to cap upside potential might evaluate selling the $42.50 strike covered calls, potentially achieving a 9.25% return if shares are called away by October 17th, or a 20.53% annualized premium yield if the option expires worthless and shares are retained.
• Investors should weigh the stated probabilities of these options expiring worthless (64% for the put, 47% for the call) against their own market outlook for OXY and consider that the implied volatilities are broadly in line with historical volatility, suggesting fair option pricing for these strategies.