November 14th Options Now Available For Thermo Fisher Scientific (TMO)

This article analyzes specific options strategies for Thermo Fisher Scientific (TMO), highlighting a cash-secured $520 put contract that offers a 2.92% premium (24.79% annualized) with a 60% probability of expiring worthless, effectively reducing the cost basis to $504.80 if assigned. Concurrently, a $550 covered call strategy provides a 3.41% premium (28.90% annualized) with a 57% chance of expiring worthless, or a 7.55% return if called away, with implied volatilities of 34% and 39% respectively, compared to TMO's 32% historical volatility.

Analysis

The analysis focuses on two specific options strategies for Thermo Fisher Scientific (TMO), which is currently trading at $528.14 per share. The first strategy involves selling a cash-secured put at the $520 strike, which generates a $15.20 premium per share. This strategy presents two potential outcomes: acquiring TMO shares at an effective cost basis of $504.80, a discount to the current market price, or seeing the option expire worthless, which has a 60% probability and would yield a 2.92% return on capital (24.79% annualized). The second strategy is a covered call at the $550 strike, which yields an $18.00 premium. This offers a 7.55% total return if the stock is called away, or a 3.41% premium boost (28.90% annualized) if the option expires worthless, an event with a 57% probability. A key observation is the elevated implied volatility in both the put (34%) and call (39%) contracts relative to the stock's trailing twelve-month historical volatility of 32%. This suggests that option premiums are currently rich compared to recent price behavior, enhancing the appeal of these premium-selling strategies.

Key Decisions for Investors

• For investors bullish on TMO seeking an entry point, selling the $520 put could be an effective strategy to either acquire the stock at a discounted cost basis of $504.80 or generate a 24.79% annualized yield on cash.
• Current TMO shareholders could consider the covered call strategy at the $550 strike to generate income, capitalizing on the elevated implied volatility of 39% versus the 32% historical volatility, which enhances the premium received.
• Given that implied volatility is currently higher than historical volatility, the environment is favorable for option-selling strategies; however, investors should monitor for a potential contraction in this volatility spread, which would reduce the attractiveness of these trades.