Investors in Pioneer Natural Resources Co (Symbol: PXD) saw new options become available today, for the July 5th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the PXD options chain for the new July 5th contracts and identified one put and one call contract of particular interest.
The put contract at the $142.00 strike price has a current bid of $5.40. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $142.00, but will also collect the premium, putting the cost basis of the shares at $136.60 (before broker commissions). To an investor already interested in purchasing shares of PXD, that could represent an attractive alternative to paying $143.64/share today.
Because the $142.80% return on the cash commitment, or 32.28% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Pioneer Natural Resources Co, and highlighting in green where the $142.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $148.00 strike price has a current bid of $5.90. If an investor was to purchase shares of PXD stock at the current price level of $143.64/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $148.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 7.14% if the stock gets called away at the July 5th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if PXD shares really soar, which is why looking at the trailing twelve month trading history for Pioneer Natural Resources Co, as well as studying the business fundamentals becomes important. Below is a chart showing PXD's trailing twelve month trading history, with the $148.00 strike highlighted in red:
Considering the fact that the $148.11% boost of extra return to the investor, or 34.87% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example, as well as the call contract example, are both approximately 40%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today's price of $143.64) to be 36%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
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