November 7th Options Now Available For Wynn Resorts (WYNN)

The article details options strategies for Wynn Resorts (WYNN), currently at $125.66, highlighting two approaches for institutional investors. Selling a $123.00 strike put for $5.25 offers a potential acquisition at an effective $117.75, with a 60% chance of expiring worthless for a 36.20% annualized return. Alternatively, a covered call strategy, selling a $127.00 strike call for $6.70, could yield 6.40% if exercised, or an annualized 45.21% "YieldBoost" if the option expires worthless (48% probability), enhancing returns through premium income.

Analysis

Analysis of current options contracts for Wynn Resorts (WYNN), trading at $125.66, reveals two distinct income-generating or strategic acquisition strategies. The first involves selling an out-of-the-money put at the $123.00 strike for a $5.25 premium. This strategy presents a dual outcome: either acquiring WYNN shares at an effective cost basis of $117.75, a material discount to the current price, or generating a 36.20% annualized return if the option expires worthless, an event with a stated 60% probability. The second strategy is a covered call, selling a $127.00 strike call for a $6.70 premium against an existing stock position. This could yield a total return of 6.40% if the stock is called away by the November 7th expiration, or provide a 45.21% annualized income boost if it expires worthless, which has a 48% probability. Critically, the implied volatility for these contracts (42-43%) is marginally higher than the stock's trailing twelve-month historical volatility of 41%, suggesting that option premiums are slightly elevated, which enhances the appeal of these option-selling strategies.

Key Decisions for Investors

• Investors looking to initiate a long position in WYNN could consider selling the $123 put to either acquire the shares at a discounted cost basis of $117.75 or to generate a 36.20% annualized yield on the required cash collateral.
• Current shareholders with a neutral to moderately bullish short-term view can enhance portfolio returns by selling the $127 covered call, which offers a potential 45.21% annualized premium yield but caps upside potential above the $127 strike price.
• Given that implied volatility is slightly above historical levels, the environment is favorable for selling options premium, though investors must remain cognizant of the risk of assignment on the put or forgoing significant gains on the covered call if the underlying stock makes a large move.