Interesting FHN Put And Call Options For December 26th

The article analyzes potential options strategies for First Horizon Corp (FHN), currently trading at $21.59. It details selling a $21.00 strike put for a 70-cent premium, which could yield a 3.33% return (24.33% annualized) if the option expires worthless, with a 61% probability. Additionally, a covered call strategy involving buying FHN and selling a $22.00 strike call for 65 cents is presented, offering a potential 4.91% total return if the stock is called away, or a 3.01% premium boost (21.98% annualized) if the call expires worthless, with a 49% probability.

Analysis

The article outlines two options strategies for First Horizon Corp (FHN), currently trading at $21.59, focusing on generating income or acquiring shares at a discount through selling an out-of-the-money put and executing a covered call. These strategies are presented as alternatives to direct stock purchase, offering potential yield enhancement.

Selling the $21.00 strike put for 70 cents offers a potential 3.33% return (24.33% annualized) if it expires worthless, with a 61% probability. This strategy effectively lowers the acquisition cost basis to $20.30 for investors willing to purchase FHN shares.

A covered call using the $22.00 strike call, sold for 65 cents, could yield a 4.91% total return if FHN is called away by December 26th, or a 3.01% premium boost (21.98% annualized) if it expires worthless (49% probability). Implied volatilities for the put (36%) and call (34%) are marginally above FHN's 33% trailing 12-month actual volatility, suggesting a slightly elevated premium for these options.

Key Decisions for Investors

• Consider utilizing the $21.00 strike put strategy for FHN to acquire shares at an effective $20.30 cost basis, capitalizing on the 61% probability of the option expiring worthless for a 24.33% annualized return on cash.
• For existing FHN shareholders, evaluate implementing a covered call strategy using the $22.00 strike call to generate additional income, targeting a 21.98% annualized premium boost if the option expires worthless, or a 4.91% total return if shares are called away.
• Prior to executing these options strategies, conduct thorough due diligence on FHN's business fundamentals and historical price action, as the article highlights the importance of these factors for long-term investment decisions.