New Options Trading Opportunities for Advance Auto Parts Investors

Investors in Advance Auto Parts Inc (Symbol: AAP) have new options available for trading, set to expire on December 19th. With 246 days remaining until expiration, these freshly launched contracts could offer investors looking to sell puts or calls a chance to achieve higher premiums compared to contracts with closer expiration dates. Using the YieldBoost formula at Stock Options Channel, we evaluated AAP’s options chain and uncovered one put and one call contract of particular interest.

Put Contract Details

The put contract for the $27.50 strike price currently has a bid of $2.30. If an investor decides to sell-to-open this put contract, they would be agreeing to purchase the stock at $27.50 while collecting the premium. This arrangement effectively lowers the cost basis of their shares to $25.20 (before broker commissions). For investors already considering buying AAP shares at today’s price of $31.27 each, this provides an appealing alternative.

Given that the $27.50 strike price is approximately a 12% discount from the current trading price, there’s also a chance the put contract could expire worthless. Current analytical data (including greeks and implied greeks) indicates a 70% likelihood of this scenario occurring. Over time, Stock Options Channel will monitor and update these odds on our website, providing a detailed chart for users. Should the contract expire worthless, the premium would yield an 8.36% return on the cash commitment, or 12.41% annualized, a model we refer to as YieldBoost.

Call Contract Insights

Shifting focus to the call side, the call contract for the $35.00 strike price has a current bid of $4.85. If an investor buys shares of AAP at the current price of $31.27 per share and sells-to-open this call contract as a “covered call,” they would agree to sell the stock at $35.00. Including the premium collected, this action could yield a total return of 27.44%, contingent upon the stock being called away by the December 19th expiration date (before broker commissions). It’s important to consider that significant upside potential could remain if AAP shares increase significantly, underlining the importance of reviewing both AAP’s trading history and business fundamentals.

Below is a chart illustrating AAP’s trailing twelve-month trading history, highlighting the $35.00 strike in red:

The $35.00 strike represents about a 12% premium above the current stock price, indicating that this covered call contract may also expire worthless. Should this occur, investors retain their shares and the premium collected. Current data suggest there is a 48% chance of this situation occurring. Trackable data on these odds, including the trading history of the option contract, will also be accessible on the Stock Options Channel website.

If the covered call contract expires worthless, it would add a 15.51% boost in extra return for the investor, or an annualized rate of 23.01%, also known as YieldBoost.

Volatility and Market Context

The implied volatility for the put contract example sits at 55%, while the call contract example shows 63%. We have calculated the actual trailing twelve-month volatility, based on the last 251 trading days and today’s price of $31.27, to be 54%. For additional insights on viable put and call options contracts, visit Stock Options Channel.

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also see:

• MPX Options Chain
• EXXI Historical Stock Prices
• INDA Videos

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.