Investors in Anheuser-Busch InBev SA/NV (symbol: BUD) saw new options for March 13 expiration begin trading today. On the Stock Options Channel, our YieldBoost formula has looked up and down the BUD options series for new contracts dated March 13 and identified one put and one call contract of particular interest.
The current bid for the put contract at the $70.00 strike price is 5 cents. If an investor were to sell that put contract, they are committed to purchasing the stock at $70.00, but will also collect a premium based on the cost of the shares at $69.95 (before broker commissions). For an investor already interested in purchasing shares of BUD, this could represent an attractive alternative to paying $70.58/share today.
Because the $70.00 strike represents about a 1% discount to the stock’s current trading price (in other words it is out-of-the-money by that percentage), there is a possibility that the put contract will expire worthless. Current analytical data (including Greeks and implied Greeks) suggests that the current probability of this happening is 60%. Stock Options Channel will track those odds over time and see how they change, publishing a chart of those numbers on our website under the contract details page for this contract. If the contract expires worthless, the premium would represent a 0.07% return on the cash commitment, or a 0.61% annualized return – we call it this on the Stock Options Channel. yieldboost.
Below is a chart that shows the last twelve months of trading history for Anheuser-Busch InBev SA/NV, and highlights in green where the $70.00 strike is located relative to that history:
Turning to the call side of the options chain, the current bid for the call contract at the $72.00 strike price is 30 cents. If an investor were to purchase shares of BUD stock at the current price level of $70.58/share, and then sell that call contract as a “covered call”, they would be committing to sell the stock at $72.00. Considering that the call seller will also collect premium, this would give a total return (excluding dividends, if any) of 2.44% if the stock is called back to March 13 expiry (before broker commission). Of course, if BUD shares really take off, there could potentially be a lot of upside, which is why it’s important to look at the last twelve month trading history of Anheuser-Busch InBev SA/NV, as well as study the fundamentals of the business. Below is a chart showing the trailing twelve month trading history of BUD, with the $72.00 strike highlighted in red:
Considering the fact that the $72.00 strike represents approximately a 2% premium on the stock’s current trading price (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract will expire worthless, in which case the investor will keep both his shares of the stock and the premium collected. Current analytical data (including Greeks and implied Greeks) suggests that the current probability of this happening is 51%. On our website under the contract details page for this contract, the Stock Options Channel will track those odds over time to see how they change and will publish a chart of those numbers (the trading history of the option contract will also be charted). If the covered call contract expires worthless, the premium would represent a 0.43% additional return to the investor or a 3.61% annual increase, which we call yieldboost.
The implied volatility in the put contract example as well as the call contract example are both around 28%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing prices as well as today’s price of $70.58) as 25%. For more put and call option contract ideas worth checking out, visit StockOptionsChannel.com.
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