As investors in Advanced Micro Devices Inc (Symbol: AMD) eyed the commencement of new options trading this week, specifically for the June 21st expiration, a plethora of opportunities and considerations unfolded. With 128 days until expiration, these newly available contracts present a ripe prospect for sellers of puts or calls to realize a higher premium compared to contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has dissected the AMD options chain for the new June 21st contracts and pinpointed a put and a call contract that are particularly intriguing.
The Put Contract Prospect
At the $175.00 strike price, the put contract currently commands a bid of $16.50. For an investor willing to sell-to-open that put contract, they’ll be committing to purchase the stock at $175.00, while also accumulating the premium, thereby establishing the cost basis of the shares at $158.50 (before broker commissions). This could offer an appealing alternative for an investor contemplating the acquisition of AMD shares, representing a 1% discount to the current trading price of the stock.
The $175.00 strike being approximately 1% below the prevailing trading price implies a 59% likelihood of the put contract expiring worthless. If it does, the premium would signify a 9.43% return on the cash commitment, or 26.89% annualized—a yield enhancement we refer to as the YieldBoost.
Visualizing the Potential
Displayed below is a chart depicting the trailing twelve-month trading history for Advanced Micro Devices Inc, underscoring the location of the $175.00 strike concerning that historical context:
The call contract at the $185.00 strike price holds a current bid of $17.55. If an investor were to purchase shares of AMD stock at the prevailing price level of $176.64/share and subsequently opt to sell-to-open that call contract as a “covered call,” they would be committing to sell the stock at $185.00. Such a maneuver could yield a 14.67% total return (excluding dividends, if any) if the stock gets called away at the June 21st expiration (before broker commissions).
The Call Contract Landscape
Of note is the 5% premium represented by the $185.00 strike concerning the current trading price of the stock, indicating a 48% likelihood of the covered call contract expiring worthless. In such a scenario, the investor would retain both their shares of stock and the collected premium, which, if the contract expires as such, would represent a 9.94% boost of extra return, or 28.34% annually—the YieldBoost.
The implied volatility in both the put and call contract examples hovers around 47%, while the actual trailing twelve-month volatility stands at 45%. For more put and call options contract ideas worth exploring, a visit to StockOptionsChannel.com is recommended.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
