Interesting DXCM Put And Call Options For November 21st

The article details potential options strategies for DexCom (DXCM) stock, highlighting a cash-secured put at the $70 strike offering a 28.95% annualized "YieldBoost" (5.00% premium) with a 64% chance of expiring worthless, or an effective purchase price of $66.50. Concurrently, a covered call at the $75 strike could generate a 40.82% annualized "YieldBoost" (7.05% premium) with a 49% chance of expiring worthless, or a 12.80% return if called away. These strategies present opportunities for income enhancement or advantageous stock acquisition/disposition, noting implied volatilities (48-49%) exceed the 12-month historical volatility (41%).

Analysis

Analysis of DexCom (DXCM) options indicates that implied volatility is trading at a premium to historical levels, with implieds at 48-49% versus a trailing twelve-month actual volatility of 41%. This elevated volatility presents opportunities for options-selling strategies designed to generate income or establish positions at a discount. Specifically, selling a cash-secured put at the $70.00 strike offers a way to potentially acquire the stock at an effective cost basis of $66.50, below the current market price of $70.92, or to capture a 5.00% premium (28.95% annualized yield) if the option expires worthless, an event with a 64% probability. For existing shareholders, a covered call strategy at the $75.00 strike could generate a total return of 12.80% if the stock is called away. Alternatively, should this out-of-the-money call expire worthless (a 49% probability), the 7.05% premium collected represents a 40.82% annualized yield enhancement while retaining the underlying shares. Both strategies are structured to monetize the current richness in DXCM's option premiums.

Key Decisions for Investors

• Investors bullish on DXCM but seeking a more attractive entry point could consider selling the $70 strike put to either acquire shares at an effective cost of $66.50 or generate a 28.95% annualized return on cash if the stock remains above the strike.
• Current DXCM shareholders can monetize the elevated implied volatility by selling the $75 strike covered call, which offers a 40.82% annualized yield boost from the premium if the option expires worthless, though it caps total return at 12.80% if the stock is called away.
• The viability of these strategies hinges on the spread between implied volatility (48-49%) and historical volatility (41%); a compression of this spread would reduce the premiums collected and diminish the appeal of selling options.