KMB August 1st Options Begin Trading

Investors considering Kimberly-Clark Corp. (KMB) can explore options strategies for enhanced yield, with the $132.00 put offering a potential 6.91% annualized return if it expires worthless, currently estimated at a 57% probability. Alternatively, a covered call strategy using the $135.00 call could yield 8.52% annualized if unassigned, with a 54% chance of expiring worthless; implied volatility for the put and call options are 20% and 22%, respectively, compared to a trailing twelve month volatility of 19%.

Analysis

The article details two options strategies for Kimberly-Clark Corp. (KMB), trading at $132.84 per share, aimed at yield enhancement or discounted share acquisition. Selling the $132.00 strike put contract, with a current bid of $1.25, could allow an investor to purchase KMB shares at an effective cost basis of $130.75 if assigned, representing a discount to the current market price. Analytical data suggests a 57% probability of this put option expiring worthless, which would result in a 0.95% return on the cash commitment, or a 6.91% annualized YieldBoost. The implied volatility for this put option is 20%. Alternatively, for investors holding or acquiring KMB shares, selling the $135.00 strike call option at a $1.55 premium as a covered call strategy commits the investor to sell shares at $135.00. If the stock is called away by the August 1st expiration, this would yield a total return of 2.79% (excluding dividends), but it caps potential upside if KMB shares significantly increase. There is a 54% estimated probability of this call option expiring worthless, in which case the premium collected would offer a 1.17% return, or an 8.52% annualized YieldBoost. The implied volatility for this call option is 22%. Both implied volatilities (20% for the put, 22% for the call) are slightly higher than KMB's actual trailing twelve-month volatility of 19%, indicating that option premiums may be modestly elevated compared to recent realized price movements, potentially favoring option sellers.

Key Decisions for Investors

• Investors aiming to acquire Kimberly-Clark Corp. shares below the current market price could consider selling the $132.00 strike put, which offers a potential entry at $130.75 or a 6.91% annualized yield if the option expires worthless.
• Existing KMB shareholders, or those purchasing shares, might evaluate selling the $135.00 strike covered call to generate income, targeting an 8.52% annualized YieldBoost if the option expires unassigned, while understanding the total return is capped at 2.79% if shares are called away.
• Carefully assess the stated probabilities of options expiring worthless (57% for the put, 54% for the call) and ensure these strategies align with your fundamental view on KMB and risk tolerance for options assignments.
• Note that KMB's options implied volatilities of 20-22% are marginally above its 19% historical volatility, which could present a slightly more favorable environment for selling options premium, contingent on continued market conditions.