Investors in HanesBrands Inc (Symbol: HBI) saw new options become available for trading this week, with an expiration date of November 17th. At Stock Options Channel, our YieldBoost formula has examined the HBI options chain for the new November 17th contracts and found one put and one call contract that stand out.
The put contract, with a strike price of $4.00, currently has a bid of 15 cents. If an investor sells this put contract, they are committing to buying the stock at $4.00 and will collect the premium. This would result in a cost basis of $3.85 per share, which is lower than the current price of $4.63/share. This could be an attractive alternative for investors interested in purchasing HBI shares.
Since the $4.00 strike price represents a 14% discount from the current stock price, there is also a possibility that the put contract may expire worthless. The current data suggests that there is a 75% chance of that happening. Stock Options Channel will monitor these odds over time and publish them on our website. If the contract expires worthless, the premium collected represents a 3.75% return on the cash commitment, or 21.71% annualized, which we refer to as the YieldBoost.
Below is a chart showing the trading history of HanesBrands Inc for the past twelve months, with the $4.00 strike highlighted:
Now let’s turn to the call options. The call contract with a strike price of $5.00 currently has a bid of 25 cents. If an investor purchases HBI shares at the current price of $4.63/share and sells this call contract as a “covered call,” they are committing to selling the stock at $5.00. With the premium collected, the total return would be 13.39% if the stock gets called away at the November 17th expiration. However, there is a possibility of missing out on potential upside if HBI shares significantly increase. It is important to consider HanesBrands Inc’s trading history and business fundamentals. Below is a chart showing HBI’s trailing twelve month trading history, with the $5.00 strike highlighted in red:
Considering that the $5.00 strike price is around 8% higher than the current stock price, there is a possibility that the covered call contract may expire worthless. The current data suggests a 60% chance of that happening. Stock Options Channel will track these odds over time and publish them along with the trading history of the option contract on our website. If the covered call contract expires worthless, the premium collected represents a 5.40% boost of extra return to the investor, or 31.26% annualized, which is referred to as the YieldBoost.
The implied volatility for the put contract is 73%, while the implied volatility for the call contract is 62%.
Additionally, the actual trailing twelve month volatility for HanesBrands Inc is calculated to be 60%. For more put and call options ideas, you can visit StockOptionsChannel.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
