RSG September 19th Options Begin Trading

Analysis of Republic Services Inc (RSG) options reveals potential strategies for investors. Selling the $230 put offers a net cost basis of $228.25 with a 79% chance of expiring worthless, yielding a 2.99% annualized return. Conversely, a covered call strategy selling the $260 call generates a potential 6.07% return if the stock is called away, with a 60% chance the contract expires worthless, providing a 7.24% annualized yield boost; implied volatilities for the put and call are 24% and 20% respectively, compared to a trailing twelve month volatility of 18%.

Analysis

The article details two options strategies for Republic Services Inc (RSG), which is currently trading at $249.46 per share. Selling a put contract with a $230.00 strike price yields a premium of $1.75, leading to an effective cost basis of $228.25 if the shares are assigned. This $230.00 strike represents an approximate 8% discount to the current stock price, and analytical data suggests a 79% probability of this out-of-the-money put expiring worthless, in which case the premium would represent a 0.76% return on the cash commitment, or 2.99% annualized. For investors currently holding RSG shares, selling a covered call at the $260.00 strike price, approximately 4% out-of-the-money, generates a $4.60 premium. If the stock is called away at the September 19th expiration, this strategy would yield a total return of 6.07% (before broker commissions and excluding dividends). There is a 60% assessed probability that this call option expires worthless, allowing the investor to keep both the shares and the premium, which would represent a 1.84% extra return, or 7.24% annualized. The implied volatility for the described put contract is 24% and for the call contract is 20%, both of which are above RSG's actual trailing twelve-month volatility of 18%, indicating potentially favorable conditions for option sellers.

Key Decisions for Investors

• Investors considering acquiring RSG shares at a price below the current $249.46 market level might evaluate selling the $230 strike put, which offers a potential entry point at $228.25 or generates a 2.99% annualized yield if the option expires worthless.
• Current RSG shareholders looking to enhance income could consider the covered call strategy with a $260 strike, which offers a potential 7.24% annualized yield boost if the option expires worthless, while acknowledging the upside is capped at $260 until the September 19th expiration.
• Given that the implied volatilities of 24% for the put and 20% for the call exceed the stock's trailing twelve-month historical volatility of 18%, strategies involving selling options could be relatively attractive due to the higher premiums currently priced into these contracts.