HSY August 1st Options Begin Trading

An analysis by Stock Options Channel highlights potential options strategies for Hershey Company (HSY). Selling a $165 put offers a 1.88% yield boost if it expires worthless, with a 61% probability based on current data, while a covered call strategy at $170 strike yields 2.90% with a 50% chance of expiring worthless; implied volatility for the put and call options are 28% and 30% respectively, compared to a trailing 12-month volatility of 27%.

Analysis

The article details two specific options strategies for Hershey Company (HSY), currently trading at $169.12 per share. Selling a $165 strike put contract, with a bid of $3.10, offers an investor the potential to acquire HSY shares at an effective cost basis of $161.90, a discount to the current market price. Alternatively, if this out-of-the-money put expires worthless, which has a 61% probability according to current analytical data, the seller would realize a 1.88% return on cash commitment, or a 13.72% annualized YieldBoost. For investors holding or acquiring HSY shares, selling a $170 strike call contract with a bid of $4.90 as a covered call could yield a 3.42% total return if the stock is called away by the August 1st expiration. If this call option, which is approximately 1% out-of-the-money, expires worthless (a 50% probability), the investor retains the shares and the premium, representing a 2.90% YieldBoost or 21.15% annualized. The implied volatility for the put is 28% and for the call is 30%, both slightly above HSY's trailing twelve-month actual volatility of 27%, suggesting option premiums may offer a slight edge to sellers.

Key Decisions for Investors

• Investors bullish on Hershey Company (HSY) and seeking a lower entry point than the current $169.12 share price could consider selling the $165 strike put to potentially acquire shares at $161.90 or generate a 1.88% return if the option expires worthless.
• Existing HSY shareholders, or those initiating a position, might evaluate writing the $170 strike covered call to generate income, potentially achieving a 2.90% yield boost if the option expires worthless, while accepting the possibility of shares being called away at $170.
• Given that implied volatilities (28-30%) are slightly above HSY's historical volatility (27%), option selling strategies may be relatively attractive, but should be aligned with individual risk assessment and fundamental views on the company.