Interesting MLCO Put And Call Options For November 21st

This analysis details options strategies for Melco Resorts & Entertainment Ltd (MLCO), currently trading at $9.61. Selling an $8.00 strike put for 10 cents offers a potential 17% discounted share acquisition at $7.90 or a 7.60% annualized return if the option expires worthless (84% probability). Conversely, a covered call using a $10.00 strike for 60 cents provides a potential 10.30% return by November 21st if shares are called away, or a 37.95% annualized yield if the option expires worthless (53% probability), leveraging implied volatilities of 49-50%.

Analysis

Current options market analysis for Melco Resorts & Entertainment (MLCO), trading at $9.61, indicates that implied volatility of 49-50% is slightly elevated compared to its trailing twelve-month realized volatility of 46%. This spread suggests that option premiums are relatively rich, favoring strategies that involve selling options. The article details two such strategies: first, selling the $8.00 strike put contract for a $0.10 premium, which offers a method to either acquire shares at an effective cost basis of $7.90 (a 17% discount) or generate a 7.60% annualized yield on the cash commitment, with an 84% probability of the option expiring worthless. Second, for shareholders, a covered call strategy selling the $10.00 strike call for a $0.60 premium can yield a 10.30% total return by the November 21st expiration if the stock is called away. If the option expires worthless, an event with a 53% probability, the premium alone represents a 37.95% annualized yield boost, though this strategy caps upside potential.

Key Decisions for Investors

• For investors bullish on MLCO but seeking a lower entry point, selling the $8.00 strike cash-secured put offers a disciplined way to either acquire shares at a 17% discount to the current price or generate a 7.60% annualized yield on the committed capital.
• Current MLCO shareholders can consider selling the $10.00 strike covered call to generate income, but must accept capping their total return at 10.30% and be prepared to sell their shares if the price rises above the strike by expiration.