VZ July 25th Options Begin Trading

Analysis of Verizon Communications (VZ) options reveals potential strategies for investors seeking yield enhancement. Selling the $42.00 put offers a discounted entry point with a potential annualized yield boost of 2.78% if the contract expires worthless, which has a 60% probability according to current data. Alternatively, a covered call strategy using the $45.00 call strike could generate a 5.02% return if the stock is called away or a 6.75% annualized yield boost if it expires worthless, with a 65% probability of the latter; implied volatilities for the put and call are 34% and 28% respectively, compared to a trailing twelve month volatility of 23%.

Analysis

The article details two options strategies for Verizon Communications (VZ) shares, currently trading at $43.23. Selling the $42.00 strike put contract, bid at $0.16, presents an opportunity to acquire shares at an effective cost basis of $41.84, a discount to the current market price. This out-of-the-money put (approximately 3% below current price) has a 60% probability of expiring worthless, which would generate a 0.38% return on the cash commitment, or an annualized YieldBoost of 2.78%. Alternatively, for investors holding or purchasing VZ shares, selling a $45.00 strike covered call, bid at $0.40, could result in a total return of 5.02% (excluding dividends) if the stock is called away by the July 25th expiration. This call strike is roughly 4% above the current price, with a 65% chance of expiring worthless; in such a scenario, the collected premium would represent a 0.93% additional return, or a 6.75% annualized YieldBoost. Notably, the implied volatility for the put option is 34% and for the call option is 28%, both of which are higher than Verizon's actual trailing twelve-month volatility of 23%, suggesting option premiums may be relatively rich.

Key Decisions for Investors

• Investors bullish on Verizon Communications (VZ) and willing to acquire shares at a discount to the current price of $43.23 could consider selling the $42.00 strike puts to achieve an effective entry point of $41.84 or earn a 2.78% annualized yield if the options expire worthless.
• Current VZ shareholders or those initiating a new long position seeking to enhance income might evaluate selling the $45.00 strike covered calls, which offer a potential 6.75% annualized yield boost if they expire worthless, but this strategy caps upside potential above $45.00 per share until expiration.
• Given that implied volatilities for VZ options (34% for puts, 28% for calls) are notably higher than the stock's 23% trailing historical volatility, option sellers may find current premium levels attractive, although this also reflects expectations of future price swings.