As investors delve into the world of Schrodinger Inc (Symbol: SDGR), the availability of new options for the September 20th expiration has sparked considerable interest. The time value, which plays a pivotal role in determining the price of an option, underscores the potential offered by the contracts, with 217 days until expiration. This creates a unique opportunity for put and call sellers to target a higher premium compared to contracts with a closer expiration date. Leveraging our YieldBoost formula, Stock Options Channel has identified one put and one call contract that stand out amidst the myriad of options available.
Potential Benefits of Selling Put Contracts
With a bid of $5.00, the put contract at the $30.00 strike price presents investors with an intriguing proposition. Those opting to sell-to-open the put contract commit to acquiring the stock at $30.00 while collecting the premium, effectively reducing the cost basis of the shares to $25.00 (before broker commissions). For an investor eyeing SDGR shares, this stands as a compelling alternative to purchasing at the current $31.71/share.
These contracts hold an approximate 5% discount to the present trading price, meaning there is a 66% likelihood that the put contract would expire worthless. This probability, influenced by an array of analytical data, will be continuously monitored by Stock Options Channel, with plans to publish a corresponding chart. Should the contract expire unexercised, the premium would yield a 16.67% return on the cash commitment or 28.04% annualized – a figure we refer to as the YieldBoost.
On the calls side, the $35.00 strike price offers a call contract with a bid of $5.70. Investors purchasing SDGR shares at $31.71 and subsequently selling-to-open the call contract are poised to sell the stock at $35.00. Factoring in the premium collected, this strategy could achieve a total return of 28.35% if the stock gets called away at the September 20th expiration (before broker commissions).
Amidst the prospects, it’s vital to consider the stock’s trading history over the past twelve months to gauge potential upside. The $35.00 strike is situated at an approximate 10% premium to the current trading price, with a 44% probability that the covered call contract would expire worthless. As with the put contract, Stock Options Channel will closely monitor and chart the odds of this occurrence. Should the contract expire without exercise, the premium would fuel a 17.98% boost of extra return or 30.24% annualized – dubbed the YieldBoost.
Evaluating Volatility and More
The implied volatility for the put contract stands at 71%, while the call contract registers 70%. Meanwhile, the trailing twelve-month volatility, calculated based on the last 251 trading day closing values plus today’s price of $31.71, is 69%. For a plethora of put and call options contract ideas worthy of consideration, we invite investors to explore StockOptionsChannel.com.
For a deeper dive into the market landscape, we recommend exploring the top yielding calls of the S&P 500, alongside insights into institutional holders, and the YTD return of CWH. Importantly, it’s essential to acknowledge that the views and opinions delineated herein are those of the author and may not mirror the sentiments of Nasdaq, Inc
