Interesting MNST Put And Call Options For August 15th

The article discusses potential options strategies for Monster Beverage Corp (MNST). Selling a $60 put offers a 2% return on cash commitment (13.04% annualized) with a 73% chance of expiring worthless, while a covered call strategy selling a $65 call offers a 5.51% return if the stock is called away, and a 3.23% return boost (21.03% annualized) if it expires worthless, with a 55% chance of that outcome; implied volatility is 29% for the put and 27% for the call, compared to a trailing twelve month volatility of 25%.

Analysis

The article outlines two specific options strategies for Monster Beverage Corp (MNST), which is currently trading at $63.55 per share. For investors interested in acquiring MNST at a discount, selling the $60.00 strike put contract with a current bid of $1.20 could result in an effective purchase price of $58.80, representing an approximate 6% discount to the current stock price. This strategy has a 73% statistical probability of the put expiring worthless, in which case the seller would realize a 2.00% return on the cash commitment, or a 13.04% annualized 'YieldBoost'. Alternatively, for existing MNST shareholders, a covered call strategy involving selling the $65.00 strike call option at a $2.05 bid is presented. This could yield a 5.51% total return (excluding dividends, before broker commissions) if MNST stock is called away at the August 15th expiration. If this call, which is approximately 2% out-of-the-money, expires worthless (a 55% probability), the investor retains their shares and the premium, representing a 3.23% 'YieldBoost' or 21.03% annualized. The implied volatility for the put is 29% and for the call is 27%, both slightly higher than MNST's actual trailing twelve-month volatility of 25%, suggesting option premiums reflect a marginally increased expectation of price movement compared to recent history.

Key Decisions for Investors

• Investors considering acquiring Monster Beverage Corp (MNST) shares at a price below the current $63.55 could evaluate selling the $60.00 strike put, which offers a potential effective cost basis of $58.80 or a 2.00% return on cash if the option expires worthless.
• Existing MNST shareholders seeking to generate income and willing to sell their shares at $65.00 could consider the covered call strategy involving the $65.00 strike expiring August 15th, which offers a 5.51% potential return if called or a 3.23% premium if it expires worthless.
• The observed implied volatilities (27-29%) being slightly above MNST's historical volatility (25%) may offer a marginally more favorable pricing environment for option sellers, although this also implies slightly higher anticipated price swings.
• Before implementing these strategies, investors should assess the stated probabilities of options expiring worthless (73% for the put, 55% for the call) and determine if the risk-reward profiles align with their specific investment objectives and outlook for MNST.