Investors in BorgWarner Inc (Symbol: BWA) saw new options trading for the August 21st expiration begin today. A notable put contract at the $70.00 strike price has a current bid of $3.60. Selling-to-open this contract would commit the investor to purchase shares at $70.00, resulting in a cost basis of approximately $66.40. This represents a 1% discount from the current trading price of $70.55 per share, with a 57% chance of expiry at zero value.
On the call side, there is a contract at the $72.50 strike price with a bid of $3.90. If shares are bought at $70.55 and this call is sold-to-open, it commits the investor to sell shares at $72.50, resulting in an 8.29% total return at expiration (excluding any dividends), should the stock be called away. The $72.50 strike represents a 3% premium, with a current 50% chance of expiry at zero, potentially offering a 5.53% additional return if it expires worthless.
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