First Week of DOX August 15th Options Trading

Analysis of Amdocs Ltd. (DOX) options reveals potential strategies for investors. Selling the $90 put offers a 2.17% yield boost (14.12% annualized) with a 61% probability of expiring worthless, while a covered call strategy using the $95 call yields 4.56% if the stock is called away or a 1.52% boost (9.90% annualized) if it expires worthless, with a 62% probability of that outcome. The implied volatility for the put and call options are 31% and 21% respectively, while the actual trailing twelve month volatility is 20%.

Analysis

Amdocs Ltd. (DOX), currently trading at $92.20 per share, presents option-based strategies for investors. Selling the $90.00 strike put contract, with a bid of $1.95, offers a potential entry point at an effective cost basis of $88.05 if assigned, representing an approximate 2% discount to the current price. Analytical data suggests a 61% probability of this put expiring worthless, which would yield a 2.17% return on the cash commitment, or 14.12% annualized. For existing shareholders, selling a covered call at the $95.00 strike price, with a bid of $1.40, could generate income. If DOX shares are called away at $95.00 by the August 15th expiration, the total return, excluding dividends, would be 4.56%. There is a 62% assessed probability of this call expiring worthless, in which case the investor retains the shares and the premium, translating to a 1.52% yield boost, or 9.90% annualized. The implied volatility for the put contract is 31%, while for the call contract it is 21%. This compares to Amdocs Ltd.'s actual trailing twelve-month volatility of 20%, indicating that the put options are pricing in a higher level of expected price movement or risk premium compared to both the call options and historical volatility.

Key Decisions for Investors

• Investors interested in acquiring Amdocs Ltd. shares at a discount to the current market price could consider selling the $90.00 strike put, which provides an effective purchase price of $88.05 if exercised or a 14.12% annualized yield if it expires worthless.
• Current Amdocs Ltd. shareholders seeking to generate additional income while holding their shares might evaluate selling the $95.00 strike covered call, which offers a potential 4.56% return if called away or a 9.90% annualized yield boost if it expires worthless, albeit capping upside potential beyond $95.00.
• Note the divergence in implied volatility, with the $90.00 put at 31% significantly above the stock's 20% historical volatility, suggesting that put sellers are being compensated for potentially higher perceived risk or that these options are relatively richly priced.