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One Put, One Call Option To Know About for Halliburton Company

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Consistently, one of the more popular stocks people enter into their stock options watchlist at Stock Options Channel is Halliburton Company (Symbol: HAL). So this week we highlight one interesting put contract, and one interesting call contract, from the November expiration for HAL. The put contract our YieldBoost algorithm identified as particularly interesting, is at the $32 strike, which has a bid at the time of this writing of $1.07. Collecting that bid as the premium represents a 3.3% return against the $32 commitment, or a 23% annualized rate of return (at Stock Options Channel we call this the YieldBoost ).

Selling a put does not give an investor access to HAL'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. So unless Halliburton Company sees its shares fall 9.7% and the contract is exercised (resulting in a cost basis of $30.93 per share before broker commissions, subtracting the $1.07 from $32), the only upside to the put seller is from collecting that premium for the 23% annualized rate of return.

Worth considering, is that the annualized 23% figure actually exceeds the 2% annualized dividend paid by Halliburton Company by 21%, based on the current share price of $35.52. And yet, if an investor was to buy the stock at the going market price in order to collect the dividend, there is greater downside because the stock would have to lose 9.71% to reach the $32 strike price.

Always important when discussing dividends is the fact that, in general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Halliburton Company, looking at the dividend history chart for HAL below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 2% annualized dividend yield.

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The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the November put or call options highlighted in this article deliver a rate of return that represents good reward for the risks. We calculate the trailing twelve month volatility for Halliburton Company (considering the last 251 trading day HAL historical stock prices using closing values, as well as today's price of $35.52) to be 39%.

In mid-afternoon trading on Monday, the put volume among S&P 500 components was 998,904 contracts, with call volume at 1.04M, for a put:call ratio of 0.96 so far for the day, which is unusually high compared to the long-term median put:call ratio of .65. In other words, there are lots more put buyers out there in options trading so far today than would normally be seen, as compared to call buyers. Find out which 15 call and put options traders are talking about today .

Top YieldBoost HAL Calls »

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


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

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