PAG Covered Call Strategy
PAG (Penske Automotive Group, Inc.), in the Consumer Cyclical sector, (Auto - Dealerships industry), listed on NYSE.
Penske Automotive Group, Inc., a diversified transportation services company, operates automotive and commercial truck dealerships. The company operates through four segments: Retail Automotive, Retail Commercial Truck, Other, and Non-Automotive Investments. It operates dealerships under franchise agreements with various automotive manufacturers and distributors. The company engages in the sale of new and used motor vehicles, and related products and services comprise vehicle and collision repair services, as well as placement of finance and lease contracts, third-party insurance products, and other aftermarket products; and wholesale of parts. It also operates a heavy and medium duty truck dealership, which offers Freightliner and Western Star branded trucks, as well as a range of used trucks, and maintenance and repair services. In addition, it imports and distributes Western Star heavy-duty trucks, MAN heavy and medium duty trucks, buses, and Dennis Eagle refuse collection vehicles with associated parts in Australia, New Zealand, and portions of the Pacific.
PAG (Penske Automotive Group, Inc.) trades in the Consumer Cyclical sector, specifically Auto - Dealerships, with a market capitalization of approximately $10.95B, a trailing P/E of 11.84, a beta of 0.89 versus the broader market, a 52-week range of 140.12-189.51, average daily share volume of 311K, a public-listing history dating back to 1996, approximately 29K full-time employees. These structural characteristics shape how PAG stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.89 places PAG roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. The trailing P/E of 11.84 is on the value side, where IV often compresses outside event windows because forward growth expectations are already discounted into the share price. PAG pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a covered call on PAG?
A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income.
Current PAG snapshot
As of May 15, 2026, spot at $163.85, ATM IV 30.30%, IV rank 2.54%, expected move 8.69%. The covered call on PAG below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 34-day expiry.
Why this covered call structure on PAG specifically: PAG IV at 30.30% is on the cheap side of its 1-year range, which means a premium-selling PAG covered call collects less credit per unit of strike-width risk, with a market-implied 1-standard-deviation move of approximately 8.69% (roughly $14.23 on the underlying). The 34-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated PAG expiries trade a higher absolute premium for lower per-day decay. Position sizing on PAG should anchor to the underlying notional of $163.85 per share and to the trader's directional view on PAG stock.
PAG covered call setup
The PAG covered call below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With PAG near $163.85, the first option leg uses a $170.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed PAG chain at a 34-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 PAG shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $163.85 | long |
| Sell 1 | Call | $170.00 | $3.50 |
PAG covered call risk and reward
- Net Premium / Debit
- -$16,035.00
- Max Profit (per contract)
- $965.00
- Max Loss (per contract)
- -$16,034.00
- Breakeven(s)
- $160.35
- Risk / Reward Ratio
- 0.060
Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium.
PAG covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on PAG. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | -$16,034.00 |
| $36.24 | -77.9% | -$12,411.30 |
| $72.46 | -55.8% | -$8,788.59 |
| $108.69 | -33.7% | -$5,165.89 |
| $144.92 | -11.6% | -$1,543.19 |
| $181.15 | +10.6% | +$965.00 |
| $217.37 | +32.7% | +$965.00 |
| $253.60 | +54.8% | +$965.00 |
| $289.83 | +76.9% | +$965.00 |
| $326.05 | +99.0% | +$965.00 |
When traders use covered call on PAG
Covered calls on PAG are an income strategy run on existing PAG stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
PAG thesis for this covered call
The market-implied 1-standard-deviation range for PAG extends from approximately $149.62 on the downside to $178.08 on the upside. A PAG covered call collects premium on an existing long PAG position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether PAG will breach that level within the expiration window. Current PAG IV rank near 2.54% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on PAG at 30.30%. As a Consumer Cyclical name, PAG options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to PAG-specific events.
PAG covered call positions are structurally neutral to slightly bullish; the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. PAG positions also carry Consumer Cyclical sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move PAG alongside the broader basket even when PAG-specific fundamentals are unchanged. Short-premium structures like a covered call on PAG carry tail risk when realized volatility exceeds the implied move; review historical PAG earnings reactions and macro stress periods before sizing. Always rebuild the position from current PAG chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on PAG?
- A covered call on PAG is the covered call strategy applied to PAG (stock). The strategy is structurally neutral to slightly bullish: A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income. With PAG stock trading near $163.85, the strikes shown on this page are snapped to the nearest listed PAG chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are PAG covered call max profit and max loss calculated?
- Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium. For the PAG covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 30.30%), the computed maximum profit is $965.00 per contract and the computed maximum loss is -$16,034.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a PAG covered call?
- The breakeven for the PAG covered call priced on this page is roughly $160.35 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current PAG market-implied 1-standard-deviation expected move is approximately 8.69%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a covered call on PAG?
- Covered calls on PAG are an income strategy run on existing PAG stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
- How does current PAG implied volatility affect this covered call?
- PAG ATM IV is at 30.30% with IV rank near 2.54%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.