Agree To Purchase Comcast At $35, Earn 2.1% Using Options

Investors eyeing a purchase of Comcast Corp (CMCSA) stock, but cautious about paying the going market price of $53.28/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the January 2016 put at the $35 strike, which has a bid at the time of this writing of 72 cents. Collecting that bid as the premium represents a 2.1% return against the $35 commitment, or a 1.3% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

START SLIDESHOW:
Top YieldBoost Puts of the Nasdaq 100 »

Selling a put does not give an investor access to CMCSA'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 $35 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 Comcast Corp sees its shares decline 34.2% and the contract is exercised (resulting in a cost basis of $34.28 per share before broker commissions, subtracting the 72 cents from $35), the only upside to the put seller is from collecting that premium for the 1.3% annualized rate of return.

Below is a chart showing the trailing twelve month trading history for Comcast Corp, and highlighting in green where the $35 strike is located relative to that history:

Loading+chart++2014+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 2016 put at the $35 strike for the 1.3% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for Comcast Corp (considering the last 252 trading day closing values as well as today's price of $53.28) to be 19%. For other put options contract ideas at the various different available expirations, visit the CMCSA Stock Options page of StockOptionsChannel.com.

More from Stocks

The Best Investment Advice? Stay Diversified

The Best Investment Advice? Stay Diversified

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Listen: Should You Buy Cisco Now?

Listen: Should You Buy Cisco Now?

Amazon Could Devastate Walgreens and Rite Aid by Getting Into Pharmacy Business

Amazon Could Devastate Walgreens and Rite Aid by Getting Into Pharmacy Business

Amazon's Assault on Grocery Stores Will Have a Profound Impact on Many

Amazon's Assault on Grocery Stores Will Have a Profound Impact on Many