KMI November 28th Options Begin Trading

The article details two options strategies for Kinder Morgan Inc. (KMI), currently trading at $28.04. Selling a $27.00 strike put for 54 cents offers a 14.59% annualized return (YieldBoost) with a 62% chance of expiring worthless, effectively lowering the purchase price to $26.46 if assigned. Concurrently, a covered call strategy involves selling a $29.00 strike call for 53 cents, which could generate a 5.31% return by November 28th if the stock is called away, or a 13.79% annualized YieldBoost if the call expires worthless, with a 54% probability. These strategies provide potential income generation and risk management insights for KMI investors.

Analysis

Kinder Morgan Inc. (KMI), currently trading at $28.04, is presented as a candidate for two distinct options strategies aimed at income generation and risk management. These strategies leverage out-of-the-money options expiring by November 28th. The general sentiment surrounding KMI is moderately positive, with a neutral tone.

Selling a $27.00 strike put contract, which is approximately 4% out-of-the-money, offers a premium of $0.54. This strategy provides a potential 14.59% annualized YieldBoost if the option expires worthless, an event with a 62% probability. Should the investor be assigned, the effective purchase price for KMI shares would be $26.46.

For existing KMI shareholders, a covered call strategy involves selling a $29.00 strike call for $0.53, representing a 3% premium to the current price. This could yield a 5.31% return by expiration if shares are called away, or a 13.79% annualized YieldBoost if the call expires worthless, with a 54% probability.

A key observation is the elevated implied volatility for both the put (43%) and call (47%) compared to KMI's trailing twelve-month historical volatility of 26%. This disparity suggests that options premiums are relatively rich, potentially favoring sellers of these contracts.

Key Decisions for Investors

• Consider initiating a cash-secured put strategy on KMI at the $27.00 strike to potentially acquire shares at a 4% discount ($26.46 effective price) while earning a 14.59% annualized premium if not assigned.
• Evaluate implementing a covered call strategy on existing KMI holdings using the $29.00 strike to generate a 13.79% annualized premium, or a 5.31% return if shares are called away by November 28th.
• Note the higher implied volatility (43-47%) relative to historical volatility (26%), which suggests favorable conditions for selling options to capture elevated premiums.