Exploring Put and Call Options Activity
Investors in Ford Motor Co. were presented with new options opportunities yesterday, specifically for the November 22nd expiration date. At Stock Options Channel, our YieldBoost formula delved into the F options landscape to unearth one put and one call contract that stood out.
The Put Option Play
The put contract at the $10.00 strike price sparked interest with a current bid of 41 cents. By selling-to-open this contract, investors tacitly agree to purchase the stock at $10.00, but they also receive the premium, trimming the cost basis of the shares to $9.59 (excluding broker fees). For those eyeing F shares, this marks a potentially enticing option to acquiring them at $10.43/share today.
This $10.00 strike hovers at a roughly 4% discount to the current stock price, positioning it out-of-the-money by that margin. There exists a chance that the put contract may expire without value. Current analytics, encompassing greeks and implied greeks, suggest a 63% likelihood of this outcome. Stock Options Channel will monitor these probabilities over time, offering a visual representation on our platform for readers to track. If the contract falls flat, the premium would yield a 4.10% return on the cash invested or 29.91% annualized – a metric we fondly term the YieldBoost.
Visualizing the Trade History
A graphical depiction below demonstrates the stock’s twelve-month trade journey, pinpointing where the $10.00 strike resides within that historical scope:
The Call Option Scenario
Shifting focus to the call side of the options spectrum, the $10.50 strike call contract grabbed attention with a 55-cent bid. If an investor procures F stock at the prevailing $10.43/share level and proceeds to sell-to-open this call contract under a “covered call” arrangement, they agree to vend the stock at $10.50. This maneuver, coupled with collecting the premium, could yield a 5.94% total return (less dividends) if the stock is called away by the November 22nd expiration (excluding broker charges). Naturally, a soaring trajectory for F shares could potentially curtail gains left on the table, warranting scrutiny of Ford’s business fundamentals and historical trading performance. The chart below delineates Ford’s twelve-month trade history, with the $10.50 strike depicted in red:
Considering that the $10.50 strike represents about a 1% premium to the existing stock price, depicting it as marginally out-of-the-money, there is a possibility that the covered call contract may conclude fruitlessly. In such an event, the investor retains both the shares and the premium received. Analytics currently pin the odds of this at 49%. Stock Options Channel will systematically monitor and chart these odds over time, presenting readers with a comprehensive view. If the covered call fizzles out, the premium would furnish the investor with a 5.27% additional return or 38.46% annualized, dubbed the YieldBoost.
Insights and More
The implied volatility in both the put and call contracts stands at around 41%. Meanwhile, our computation reveals the actual trailing twelve-month volatility (factoring in the last 251 trading day closings along with today’s price of $10.43) as 39%. For further exploration of put and call options contract suggestions, we welcome you to visit StockOptionsChannel.com.
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