Energy Transfer LP Offers New Covered Call Options Strategy

A report reveals that Energy Transfer LP has introduced new options for February 2025, which could influence investor strategies. With a total return scenario of 4.50% for calling away stocks, potential volatility plays a crucial role in decision-making.

Date: 26-12-2024

AI Rating: 7

The report outlines a new trading opportunity for Energy Transfer LP (ET) as new options contracts are now available with a February 2025 expiration. Investors are evaluating a call contract at a $20.00 strike price, which presents a possible total return of 4.50%. This return assumes that the stock price reaches the strike price, which is approximately 3% higher than the current trading price of $19.34. This strategy, known as a covered call, allows the investor to collect a premium while committing to sell shares at a predetermined price.

It's noteworthy that there is a 52% probability that the call option may expire worthless, allowing the investor to retain both their shares and the premium. If this occurs, it would result in an added return of 1.09%, equating to an annualized return of 9.22%. This potential yield enhancement reflects the attractive aspects of this options strategy amidst current market conditions.

The implied volatility of 61% on the call contract suggests that the market is pricing in considerable uncertainty regarding the stock's price movement, though actual trailing volatility sits at a more modest 18%. This discrepancy highlights the investor's need for careful analysis of potential price swings when considering option strategies.

Stocks: ET