On March 1st, investors in Ford Motor Co. (Symbol: F) will encounter new options available for trading. Intriguingly, the options chain presents an opportunity worth exploring as it offers a put and a call contract with distinctive appeal.
Unearthing a Lucrative Put Contract
Amidst the plethora of new options, the put contract at the $11.50 strike price stands out with a current bid of 50 cents. Potential investors selling this put contract commit to purchasing the stock at $11.50 and also stand to collect the premium, effectively reducing the cost basis of the shares to $11.00. This poses an appealing alternative to the current market price of $11.64, providing a 1% discount. Therein lies the possibility of the put contract expiring worthless, currently estimated at 56%. The intriguing data point to a 4.35% return on the cash commitment, or an enticing 31.74% annualized return, labeled the YieldBoost.
The $11.50 strike is represented on a chart of Ford Motor Co.’s last twelve months’ trading history, showcased in green.
The Provocative Call Contract
On the calls side, the call contract at the $13.00 strike price garners attention with a current bid of 11 cents. For investors purchasing F stock at the prevailing $11.64/share and selling-to-open this call contract as a “covered call,” the commitment to sell the stock at $13.00 presents a potential 12.63% total return (excluding dividends) if the stock is called away at the March 1st expiration. Additionally, odds of the covered call contract expiring worthless forecast at 99%, promising a 0.95% extra return to the investor, or a compelling 6.90% annualized return, termed the YieldBoost.
Visualizing Ford Motor Co.’s last twelve months’ trading history reveals the placement of the $13.00 strike, prominently highlighted in red.
Volatility and Concluding Thoughts
The implied volatility in the put contract is calculated at 39%, juxtaposed with the actual trailing twelve month volatility of 36%. As March 1st approaches, the decision on put and call options becomes increasingly crucial, and those seeking more contract ideas will find valuable insights at StockOptionsChannel.com.
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