AZO

Commit To Buy AutoZone At $2650, Earn 3% Annualized Using Options

Investors eyeing a purchase of AutoZone, Inc. (Symbol: AZO) shares, but tentative about paying the going market price of $3121.89/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the January 2025 put at the $2650 strike, which has a bid at the time of this writing of $68.20. Collecting that bid as the premium represents a 2.6% return against the $2650 commitment, or a 3% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

Selling a put does not give an investor access to AZO's upside potential the way owning shares would, because the put seller only ends up owning shares in the scenario where the contract is exercised. And the person on the other side of the contract would only benefit from exercising at the $2650 strike if doing so produced a better outcome than selling at the going market price. (Do options carry counterparty risk? This and six other common options myths debunked). So unless AutoZone, Inc. sees its shares fall 15.2% and the contract is exercised (resulting in a cost basis of $2581.80 per share before broker commissions, subtracting the $68.20 from $2650), the only upside to the put seller is from collecting that premium for the 3% annualized rate of return.

Below is a chart showing the trailing twelve month trading history for AutoZone, Inc., and highlighting in green where the $2650 strike is located relative to that history:

Loading+chart+—+2024+TickerTech.com

The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the January 2025 put at the $2650 strike for the 3% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for AutoZone, Inc. (considering the last 251 trading day closing values as well as today's price of $3121.89) to be 22%. For other put options contract ideas at the various different available expirations, visit the AZO Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Friday, the put volume among S&P 500 components was 829,525 contracts, with call volume at 829,525, for a put:call ratio of 0.72 so far for the day, which is above normal compared to the long-term median put:call ratio of .65. In other words, if we look at the number of call buyers and then use the long-term median to project the number of put buyers we'd expect to see, we're actually seeing more put buyers than expected out there in options trading so far today. Find out which 15 call and put options traders are talking about today.

Top YieldBoost Puts of Stocks Conducting Buybacks »

Also see:
• ETFs Holding PBA
• OCIP Insider Buying
• AGR market cap history

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.