Interesting HES Put And Call Options For July 11th

Analysis of Hess Corp (HES) options reveals potential strategies for investors, including selling put options at the $130 strike price, offering a possible 2.08% return if the contract expires worthless (17.63% annualized), with a 56% probability of that outcome. Alternatively, selling covered calls at the $135 strike price could yield a 4.27% return if the stock is called away, or a 1.60% boost (13.56% annualized) if the contract expires worthless, with a 58% probability; implied volatility for puts and calls are 30% and 31% respectively, compared to a trailing twelve month volatility of 29%.

Analysis

The article details two options strategies for Hess Corp (HES), which is trading at $131.48 per share, offering potential avenues for investors. Selling a put contract at the $130.00 strike price, with a current bid of $2.70, could allow an investor to acquire HES shares at an effective cost basis of $127.30, should the stock price fall below $130.00 by expiration. Current analytics suggest a 56% probability of this put expiring worthless, in which case the seller retains the $2.70 premium, representing a 2.08% return on the cash commitment, or an annualized YieldBoost of 17.63%. On the other hand, for current HES shareholders, selling a covered call at the $135.00 strike price against their shares, with a bid of $2.10, presents an opportunity for income generation. If HES stock is called away at $135.00 by the July 11th expiration, the strategy would yield a total return of 4.27% (excluding dividends and commissions). There is a 58% assessed probability of this call option expiring worthless, allowing the investor to keep both their shares and the premium, which translates to a 1.60% YieldBoost or 13.56% annualized. The implied volatilities for these specific put (30%) and call (31%) options are marginally higher than Hess Corp's actual trailing twelve-month volatility of 29%, indicating that option premiums might offer a slight edge to sellers compared to recent historical price fluctuations.

Key Decisions for Investors

• Investors evaluating an entry into Hess Corp (HES) could consider selling the $130.00 strike put, aiming for an effective purchase price of $127.30 if assigned or capturing a 17.63% annualized yield from the premium if the option expires worthless.
• Existing HES shareholders might explore selling the $135.00 strike covered call to potentially achieve a 4.27% total return if shares are called away by the July 11th expiration, or to enhance yield by 13.56% annualized if the option expires unexercised.
• The slight premium in implied volatility (30-31%) over historical volatility (29%) suggests potentially favorable pricing for option sellers, but investors should carefully assess the stated probabilities of expiration (56% for the put, 58% for the call) and align these strategies with their individual risk tolerance and outlook for HES.