Investors in Apple Inc (Symbol: AAPL) welcomed the emergence of new options available today for the November 22nd expiration. The analysis by Stock Options Channel offers insight into two intriguing contracts – one put and one call – worthy of consideration.
Opportunity in Put Options
Let’s first dissect the put contract at a $200.00 strike price, with a current bid of $1.74. By selling-to-open this put option, investors commit to buying AAPL shares at $200.00, while also pocketing the premium. Effectively, this move decreases the cost basis to $198.26 per share. For those eyeing AAPL stocks, this discounted rate presents an appealing alternative compared to the current market price of $224.66/share.
At an approximate 11% discount to the prevailing stock price, the $200.00 strike is considered out-of-the-money by that percentage. This translates to an 85% likelihood of the put contract expiring worthless. The ‘YieldBoost’ formula at Stock Options Channel calculates the premium as a 0.87% return on the cash commitment, or 6.35% annualized.
The accompanying chart visually maps the twelve-month trading history of Apple Inc, marking the $200.00 strike in green.
Exploring Call Options
Shifting focus to call options, the $230.00 strike price call contract carries a bid of $6.75. Investors acquiring AAPL shares at $224.66/share and selling-to-open this ‘covered call’ commit to selling shares at $230.00, in addition to retaining the premium. This strategy yields a total return of 5.38% if shares get called away upon the November 22nd expiration.
With the $230.00 strike holding an approximate 2% premium to the current stock price, there is a 54% chance of the call contract expiring worthless. The risk, however, is mitigated as investors retain both shares and the premium in this scenario. The ‘YieldBoost’ metric quantifies this premium as a 3.00% supplementary return, or 21.91% annualized.
By visually representing the trailing twelve-month trading history, the chart highlights the $230.00 strike in red.
Comparing Volatility
Implied volatility stands at 35% for put options and 26% for call options. Actual trailing twelve-month volatility, based on historical stock data, and current price, is calculated at 22%. This insights into the comparative dynamics of the options marketplace.
To explore more intriguing put and call option strategies, visit StockOptionsChannel.com.
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