New CME Group Options Trading Presents Unique Investment Opportunities
Investors in CME Group (Symbol: CME) gained access to new options that began trading today with an expiration date of August 15th. One critical factor impacting the price an option buyer is willing to pay is the time value. With 128 days remaining until expiration, the newly available contracts provide an enticing opportunity for sellers of puts or calls to achieve higher premiums compared to those with a closer expiration date. Our analysis at Stock Options Channel has identified a noteworthy put and call contract within the August 15th contracts.
Put Contract Analysis
The put contract at the $240.00 strike price currently holds a bid of $8.70. If an investor sells-to-open this put contract, they commit to purchasing CME shares at $240.00 while collecting the premium. This arrangement effectively reduces their cost basis for the shares to $231.30, before accounting for broker commissions. For investors looking to acquire CME shares, this strategy might be a favorable alternative to the current market price of $252.74 per share.
The $240.00 strike stands approximately 5% below the current trading price, rendering it out-of-the-money by that same percentage. Current analytics indicate a 66% chance that the put contract could expire worthless. Over time, Stock Options Channel will monitor and publish these odds on our website, specifically on the contract detail page. If the contract does expire worthless, the premium would yield a 3.62% return on cash commitment, translating to an annualized return of 10.34%, a metric we refer to as the YieldBoost.
CME’s Trading History
Below is a chart reflecting the trailing twelve-month trading history for CME Group, illustrating where the $240.00 strike lies in relation to this history:
Call Contract Analysis
Turning to the call contracts, the $260.00 strike call has a current bid of $12.80. If an investor buys CME shares at the prevailing price of $252.74 and sells-to-open the call contract as a “covered call,” they commit to selling their shares at $260.00. Adding the premium collected from the call would lead to a total return of 7.94% if the stock is called away at the August 15th expiration, excluding any potential dividends and broker commissions. However, significant upside could be missed if CME shares experience considerable growth, underscoring the importance of analyzing both historical trading data and business fundamentals.
Below is a chart showcasing CME’s trailing twelve-month trading history, with the $260.00 strike highlighted in red:
Notably, the $260.00 strike corresponds to an approximate 3% premium over the current trading price, categorizing it as out-of-the-money by that percentage. There is also a possibility that the call contract may expire worthless, allowing the investor to maintain both their shares and the collected premium. According to current analytical data, the likelihood of this scenario is about 52%. We will continue to track these odds over time on our website, providing updates along with visualization of the trading history of the option contract. If the covered call expires without being exercised, it would represent an additional return boost of 5.06% for the investor, or an annualized rate of 14.44%, another figure we refer to as the YieldBoost.
The implied volatility for the put contract stands at 27%, while the call contract’s implied volatility is 30%. In contrast, we estimate the actual trailing twelve-month volatility—based on the previous 251 trading days and today’s price of $252.74—to be 18%. For more analysis on put and call options contracts, visit StockOptionsChannel.com.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
