Interesting WM Put And Call Options For January 2028

The article details two options strategies for Waste Management (WM) shares, currently trading at $218.71, offering institutional investors methods for yield enhancement or cost basis management. It outlines selling a $210.00 strike put for a $16.80 premium, providing a potential 3.40% annualized return (YieldBoost) with a 68% chance of expiring worthless, and a covered call strategy using a $240.00 strike call for a $19.80 premium, which could deliver an 18.79% total return if called away by January 2028 or a 3.85% annualized YieldBoost if it expires worthless. These examples highlight tactical approaches to generate income or acquire shares at a discount.

Analysis

The provided information details two options-based strategies for Waste Management, Inc. (WM), which is currently trading at $218.71 per share. The first strategy involves selling a cash-secured put with a $210.00 strike price, yielding a $16.80 premium. This lowers the effective purchase price to $193.20 if assigned, representing an attractive entry point for investors already interested in the stock. There is a 68% probability that this out-of-the-money put will expire worthless, in which case the seller would realize a 3.40% annualized return on the cash commitment. The second strategy is a covered call, involving the purchase of WM shares at the current price and selling a January 2028 call option at a $240.00 strike for a $19.80 premium. This strategy caps the upside but offers a potential total return of 18.79% if the stock is called away. If the call expires worthless, which has a 49% probability, the investor retains the shares and earns a 3.85% annualized yield boost from the premium. Notably, the implied volatilities for the put (22%) and call (19%) are slightly elevated compared to the stock's trailing twelve-month actual volatility of 18%, suggesting that option premiums are currently priced favorably for sellers.

Key Decisions for Investors

• Investors bullish on WM but seeking a lower entry point should consider selling the $210 strike put to either acquire shares at an effective cost basis of $193.20 or generate a 3.40% annualized yield.
• Current or new WM shareholders with a moderately bullish outlook can enhance returns by selling the $240 strike covered call, which offers a 3.85% annualized yield boost while allowing for capital appreciation up to the strike price.
• Given that implied volatility (19-22%) exceeds historical volatility (18%), this is an opportune time to execute premium-selling strategies, but investors must monitor for shifts in volatility which could alter the risk-reward profile of these positions.