Opportunity in the Options Market
Today marks the introduction of new options trading for Ford Motor Co. (Symbol: F) for the December 20th expiration. This development has piqued the interest of investors seeking potential opportunities for sellers of puts or calls.
One of the significant factors influencing the price of an option is the time value. With 343 days until expiration, these freshly traded contracts offer a potential opportunity for sellers to garner a higher premium than what would be available for contracts with a closer expiration.
Promising Put Option
Upon scanning the F options chain for the new December 20th contracts, the YieldBoost formula at Stock Options Channel has identified a put contract at the $10.00 strike price with a current bid of 75 cents. If an investor chooses to sell-to-open that put contract, they are committing to purchasing the stock at $10.00, while also collecting the premium. This results in a cost basis of the shares at $9.25 (before broker commissions), which could represent an appealing alternative to the current trading price per share of $11.59.
Assessing the Likelihood of Expiry
Given that the $10.00 strike represents about a 14% discount to the current trading price of the stock, there is a possibility that the put contract would expire worthless. The current analytical data, including greeks and implied greeks, suggest a high probability (99%) of this occurrence. Stock Options Channel will monitor these odds over time to examine their evolution, sharing the chart of those numbers on their website. If the contract were to expire worthless, the premium would represent a significant return on the cash commitment.
Potential Returns from a Call Option
On the calls side of the option chain, a call contract at the $12.00 strike price has a current bid of $1.15. Should an investor purchase shares of F stock at the current price level of $11.59/share and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $12.00, driving a total potential return of 13.46% (excluding dividends, if any) if the stock gets called away at the December 20th expiration (before broker commissions).
Calculating the Odds
Considering that the $12.00 strike represents approximately a 4% premium to the current trading price of the stock, there is also the possibility that the covered call contract would expire worthless. The current analytical data suggests a 99% chance of this happening. Stock Options Channel will track these odds over time and publish a chart of those numbers. If the covered call contract were to expire worthless, the premium would represent a substantial boost of extra return to the investor.
Volatility and Further Options
As the actual trailing twelve month volatility is calculated to be 35%, there may be more put and call options contract ideas worth exploring at StockOptionsChannel.com. Intrigued investors can look into other investment opportunities as well.
