Interesting CAH Put And Call Options For November 7th

For Cardinal Health (CAH), currently trading at $153.24, the article details two options strategies: selling a $150.00 strike put for a $2.55 premium, offering a 14.42% annualized return if it expires worthless (61% probability) and a potential $147.45 cost basis; and a covered call strategy using a $155.00 strike call for $3.30, yielding an 18.26% annualized premium if it expires worthless (52% probability) or a 3.30% total return if called away. Implied volatilities for these options (30% for the put, 29% for the call) are noted against CAH's 23% trailing 12-month actual volatility.

Analysis

The options market for Cardinal Health, Inc. (CAH), currently trading at $153.24, presents opportunities for income generation, driven by an elevated implied volatility premium. Analysis of two specific out-of-the-money options reveals this dynamic. A cash-secured put strategy at the $150.00 strike offers a premium of $2.55, establishing a potential acquisition cost basis of $147.45. Should this contract expire worthless, an event with a 61% probability according to current models, it would generate a 14.42% annualized return on the cash commitment. For existing shareholders, a covered call strategy at the $155.00 strike yields a $3.30 premium. This could result in an 18.26% annualized return if the option expires worthless (a 52% probability) or a total return of 3.30% if the shares are called away. Critically, the implied volatility for these options (30% for the put, 29% for the call) is substantially higher than the stock's trailing twelve-month actual volatility of 23%, indicating that options sellers are being compensated for a higher expected price movement than has historically been observed.

Key Decisions for Investors

• Investors bullish on CAH who are willing to acquire shares could consider selling the $150 strike put to either generate a 14.42% annualized yield or purchase the stock at an effective cost basis of $147.45, below the current market price.
• Current CAH shareholders seeking to generate income may find the covered call strategy at the $155 strike attractive, offering a potential 18.26% annualized premium yield while capping total return at 3.30% if the stock is called away.
• The significant spread between implied volatility (29-30%) and historical volatility (23%) suggests that selling options on CAH is currently a favorable strategy for income-focused investors, as option premiums are inflated relative to the stock's past price behavior.