November 7th Options Now Available For Fiserv (FI)

This analysis details two options strategies for Fiserv (FI) stock: selling a $115 strike put, which offers a potential entry point at $113.25 (an 11% discount to current price) and a 12.90% annualized return if the 79% likely scenario of expiring worthless occurs; and a covered call strategy selling a $130 strike call, yielding a 6.03% return if assigned or a 45.32% annualized premium boost if the 47% likely scenario of expiring worthless occurs. Implied volatilities for these options (51% for puts, 46% for calls) are noted to be higher than FI's 40% trailing 12-month actual volatility.

Analysis

The analysis focuses on two specific options strategies for Fiserv (FI), which is currently trading at $129.12 per share. The first strategy involves selling a cash-secured put at the $115.00 strike price, collecting a $1.75 premium. This strategy presents a dual outcome: either acquiring the stock at an effective cost basis of $113.25, an 11% discount to the current price, or generating a 12.90% annualized return on the cash collateral if the option expires worthless, an event with an estimated 79% probability. The second strategy is a covered call, selling the $130.00 strike call for a $6.90 premium against an existing stock position. This could result in a total return of 6.03% if the stock is called away, or if it expires worthless (a 47% probability), the premium would represent a 45.32% annualized yield enhancement. A key insight is the discrepancy between implied and historical volatility; the implied volatility of the put (51%) and call (46%) is significantly elevated compared to the stock's actual trailing twelve-month volatility of 40%. This suggests that options premiums are currently rich relative to the stock's recent price behavior, making option-selling strategies potentially more attractive.

Key Decisions for Investors

• Investors bullish on Fiserv but seeking a lower entry point could consider selling the $115 strike put to either acquire shares at an effective 11% discount or collect a 12.90% annualized premium.
• Current shareholders of Fiserv could evaluate the $130 strike covered call as a yield-enhancement strategy, which offers a potential 6.03% total return upon assignment or a significant annualized premium if the stock price remains below the strike.
• Given that implied volatility (46-51%) is currently higher than the stock's trailing actual volatility (40%), strategies that involve selling options premium, such as those presented, are mathematically favored over buying options.