One Put, One Call Option To Know About For JPMorgan Chase
Selling a put does not give an investor access to JPM'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 JPMorgan Chase & Co. sees its shares decline 11.6% and the contract is exercised (resulting in a cost basis of $49.10 per share before broker commissions, subtracting the 90 cents from $50), the only upside to the put seller is from collecting that premium for the 5% annualized rate of return.
Worth considering, is that the annualized 5% figure actually exceeds the 2.7% annualized dividend paid by JPMorgan Chase & Co. by 2.3%, based on the current share price of $56.57. 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 11.6% to reach the $50 strike price.