HON November 14th Options Begin Trading

The article outlines two options strategies for Honeywell International Inc. (HON), currently trading at $211.66, presenting opportunities for income generation or discounted acquisition. Selling a $185.00 cash-secured put, 13% out-of-the-money with a 91% chance of expiring worthless, yields a 2.52% annualized premium if not assigned. Alternatively, a covered call strategy using a $215.00 strike, 2% out-of-the-money with a 55% chance of expiring worthless, offers a 4.32% total return if shares are called away by November 14th, or a 23.24% annualized premium if the option expires unexercised, contextualized by HON's 25% trailing volatility.

Analysis

Two options-based income strategies for Honeywell International Inc. (HON), currently priced at $211.66, are presented. The first involves selling a cash-secured put at the $185.00 strike, which is approximately 13% out-of-the-money. This strategy provides an opportunity to either acquire HON shares at an effective cost basis of $184.45 or, should the option expire worthless—an event with a 91% calculated probability—generate a 2.52% annualized return on the committed capital. The second strategy is a covered call at the $215.00 strike for an investor holding the stock, expiring November 14th. This call, which is 2% out-of-the-money, could generate a total return of 4.32% if the stock is called away or, if it expires worthless (a 55% probability), provide a premium representing a 23.24% annualized yield boost. Notably, the implied volatility for the put is 33%, significantly higher than both the call's 25% implied volatility and the stock's 25% trailing twelve-month historical volatility, indicating a potential volatility skew where investors are pricing in higher risk of a downward move.

Key Decisions for Investors

• For investors bullish on HON but seeking a more attractive entry point, selling the $185 cash-secured put offers a structured way to either acquire shares at a ~13% discount to the current market price or generate a 2.52% annualized yield while waiting.
• Current HON shareholders with a neutral-to-moderately-bullish short-term outlook could consider the covered call strategy at the $215 strike to generate a significant annualized yield of 23.24%, while accepting a cap on potential upside at a 4.32% total return if the stock is called away.
• Investors should note the elevated implied volatility of 33% on the out-of-the-money put contract, which stands above the call's and historical volatility of 25%, suggesting the market is pricing a premium for downside protection that should be considered against the put-selling strategy's high statistical probability of success.