Lowe's Beats Earnings Expectations Despite Weakening Sales
Lowe's is set to report earnings, and the options market is expecting a 4.2% move in either direction. One strategy to take advantage of the high implied volatility is to sell a cash-secured put in Lowe's stock. This involves selling an at-the-money or out-of-the-money put option while setting aside enough cash to buy the stock if assigned. By selling the Aug. 25-expiring put option with a strike price of 217.50, traders can generate around $3.75 in premium per contract. If the stock stays above the strike price at expiry, the put option expires worthless, resulting in a 1.75% return on capital at risk. However, there is a risk of loss if the stock falls significantly. Cash-secured puts can be a way to generate a return on stocks the trader is willing to own.