December 26th Options Now Available For US Bancorp (USB)

For US Bancorp (USB), currently trading at $46.88, an analysis highlights two options strategies: selling a $45.00 strike put for a $0.50 premium, which implies an effective purchase price of $44.50 or an 8.11% annualized return if the option expires worthless (64% probability). Alternatively, a covered call strategy involves selling a $50.00 strike call for $0.50 against existing shares, potentially yielding a 7.72% total return by December 26th if called away, or a 7.79% annualized premium boost if the call expires worthless (66% probability). Implied volatilities for these options are 38% and 36%, respectively, contrasting with USB's 27% trailing 12-month actual volatility.

Analysis

US Bancorp (USB), currently trading at $46.88, presents two distinct options strategies for investors. Selling a cash-secured put at the $45.00 strike price for a $0.50 premium offers an effective purchase price of $44.50, representing a 4% discount to the current market price. This strategy yields an 8.11% annualized return if the option expires worthless, with a 64% probability of this outcome.

Concurrently, a covered call strategy utilizing the $50.00 strike call, also priced at $0.50, offers a potential 7.72% total return by December 26th if the shares are called away. If the call expires worthless, which has a 66% probability, the premium collected translates to a 7.79% annualized boost. This strike is approximately 7% above the current trading price.

The implied volatility for the $45.00 put is 38%, and for the $50.00 call, it is 36%. These figures are notably higher than USB's trailing twelve-month actual volatility of 27%, suggesting options are pricing in greater future price swings than historical data indicates. Both strategies leverage the "YieldBoost" concept by generating income from premium collection.

Key Decisions for Investors

• Consider selling cash-secured puts on USB at the $45.00 strike to acquire shares at a discount or generate income, given the 8.11% annualized YieldBoost and 64% probability of expiration worthless.
• For existing USB holders, evaluate implementing a covered call strategy using the $50.00 strike to enhance portfolio yield with a potential 7.72% return or 7.79% annualized premium, while acknowledging potential upside limitation.
• Monitor USB's price action and implied volatility relative to its historical 27% volatility, as higher implied volatility (36-38%) suggests options premiums may be attractive but also indicate higher perceived risk.