One Put, One Call, To Know About for 3M

Consistently, one of the more popular stocks people enter into their stock options watchlist at Stock Options Channel is 3M Co (NYSE: MMM). So this week we highlight one interesting put contract, and one interesting call contract, from the January 2016 expiration for MMM.

The put contract our YieldBoost algorithm identified as particularly interesting is at the $95 strike, which has a bid at the time of this writing of $5.50. Collecting that bid as the premium represents a 5.8% return against the $95 commitment, or a 2.5% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

Selling a put does not give an investor access to MMM be 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 3M Co sees its shares fall 20.8% and the contract is exercised (resulting in a cost basis of $89.50 per share before broker commissions, subtracting the $5.50 from $95), the only upside to the put seller is from collecting that premium for the 2.5% annualized rate of return. Read more