One Put, One Call Option To Know About For Oracle
Selling a put does not give an investor access to ORCL'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 Oracle Corp. sees its shares fall 6.3% and the contract is exercised (resulting in a cost basis of $34.35 per share before broker commissions, subtracting the 65 cents from $35), the only upside to the put seller is from collecting that premium for the 10% annualized rate of return.
Interestingly, that annualized 10% figure actually exceeds the 1.3% annualized dividend paid by Oracle Corp. by 8.7%, based on the current share price of $37.35. 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 6.32% to reach the $35 strike price.
Always important when discussing dividends is the fact that, in general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Oracle Corp., looking at the dividend history chart for ORCL below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 1.3% annualized dividend yield.