November 21st Options Now Available For Alexandria Real Estate Equities (ARE)

Option strategies for Alexandria Real Estate Equities (ARE), currently trading at $84.38, present distinct risk-reward profiles. Selling a cash-secured put at the $82.50 strike for a $2.30 premium offers a potential entry at an effective $80.20 or a 14.12% annualized yield if the put expires worthless (57% probability). Conversely, a covered call at the $90.00 strike for a $1.95 premium provides an 8.97% total return if assigned, or an 11.71% annualized yield if it expires worthless (66% probability), though it caps upside. Implied volatilities for these options are marginally above ARE's 31% trailing 12-month actual volatility.

Analysis

Alexandria Real Estate Equities (ARE), trading at $84.38, is the focus of two distinct options strategies presented for consideration. The first, selling a cash-secured put at the $82.50 strike, generates a $2.30 premium, creating an effective cost basis of $80.20 if assigned. This represents a strategy for acquiring shares at a discount to the current price, with a 57% statistical probability of the option expiring worthless, in which case the seller would realize a 14.12% annualized return on the cash commitment. The second strategy, a covered call at the $90.00 strike for shareholders, yields a $1.95 premium. This caps the total return at 8.97% if the stock is called away at expiration, but offers a 66% probability of expiring worthless, providing an 11.71% annualized yield boost while retaining the shares. A key data point is the slight elevation of implied volatility in the put (35%) and call (33%) contracts relative to ARE's actual trailing twelve-month volatility of 31%, suggesting options are pricing in a marginally higher level of future price movement than has been recently observed.

Key Decisions for Investors

• Investors bullish on ARE who are seeking a lower entry point could consider selling the $82.50 cash-secured put to either acquire shares at an effective cost of $80.20 or generate a 14.12% annualized yield on collateral.
• Current shareholders aiming to generate income could write the $90.00 covered call, which offers an 11.71% annualized yield boost, but must accept a capped total return of 8.97% and forfeit upside above the strike price.
• Given that implied volatility is marginally higher than historical volatility, the premiums offered for selling these options may be seen as modestly attractive, compensating sellers for taking on the underlying price risk.
• Investors should note the probabilistic nature of these strategies, with a 57% chance of the put expiring worthless and a 66% chance for the call, and weigh these odds against their own fundamental view of ARE.