FMC Corp. Put Selling Strategy Offers 5.3% Annualized Return

Investors eyeing FMC Corp. stock can consider put selling. The January 2027 put option at $35 strike offers a 5.3% annualized return. This strategy provides a favorable alternative to direct stock purchase amid market price concerns.

Date: 13-01-2025

AI Rating: 6

Evaluation of FMC Corp. Investment Strategy

Investors contemplating FMC Corp. shares may find selling puts an attractive alternative. The report highlights a specific put contract set for January 2027 at a $35 strike price, which carries a bid of $3.70. This premium represents a noteworthy 5.3% annualized return in comparison to the 4.5% dividend yield available with direct stock purchase. The apparent benefit of this strategy lies in the premium collected.

However, it's crucial to note that selling a put does not provide the same upside potential as owning the shares outright. The put seller is only likely to acquire shares if the market price drops significantly, specifically a 31.6% decrease to $35, which would then result in an adjusted cost per share of $31.30, after factoring in the sold premium.

Additionally, the report outlines the unpredictability of dividends, which correlate to the company's profitability. Though FMC Corp. currently reflects a steady dividend history, the assurance of ongoing dividends can't be guaranteed, given market conditions and profitability trends.

The mention of historical volatility at 42% is particularly pertinent as it indicates a moderate risk level. This volatility should be factored into any investment decision, aligning with the put strategy's return potential.

Stocks: FMC