New Options for Discover Financial Services Present Attractive Opportunities
Insight into December 13th Options: Potential Gains for Investors
Today, investors in Discover Financial Services (Symbol: DFS) have new options available with a deadline of December 13th. Using our YieldBoost formula, Stock Options Channel identified a notable put and a call contract from the DFS options chain that could be of significant interest.
The put contract at the $146.00 strike price currently has a bid of $5.70. If an investor decides to sell-to-open this put, they commit to buying the stock at $146.00. This means they will also collect the premium, reducing their effective purchase price to $140.30 (excluding broker commissions). For those looking to buy DFS shares, this option could be more attractive than the current market price of $152.39 per share.
This $146.00 strike price gives an approximate 4% discount to the current trading value, meaning there’s a chance that the put could expire worthless. Current data suggests there’s a 64% likelihood of this happening. Our website will monitor these odds and provide regular updates under the contract detail page for this option. Should the put expire worthless, the collected premium would yield a return of about 3.90% on the cash commitment, equating to a remarkable 33.11% annualized, what we term a YieldBoost.
Below, you can see a chart displaying the past twelve months of trade history for Discover Financial Services, highlighting where the $146.00 strike price sits relative to that historical context:
Shifting focus to the calls, a $155.00 strike price call contract currently shows a bid price of $8.10. If an investor buys shares of DFS at $152.39 and sells the call as a “covered call,” they agree to sell at $155.00. This strategy would yield a total return (not counting dividends) of 7.03% by the expiration date of December 13th if the stock is called away. However, investors should be cautious, as the potential for significant upside exists if DFS shares rise steeply. Thus, it’s crucial to evaluate the past year’s trading history and the company’s fundamentals.
The following chart illustrates DFS’s trailing twelve-month trading history, with the $155.00 strike price highlighted in red:
The $155.00 strike is approximately 2% above the current trading price, suggesting that there’s a chance the covered call could expire worthless. If that occurs, the investor would retain both the shares and the premium earned. Current analysis indicates a 49% chance of this scenario happening. Stock Options Channel will document these odds over time, providing a chart on our website. Should the covered call expire worthless, the premium could represent a 5.32% additional return for the investor, or 45.07% annualized; this also falls under our term YieldBoost.
In terms of volatility, the implied volatility for the put contract stands at 51%, while the call contract is at 50%. In comparison, the actual trailing twelve-month volatility, based on the last 251 trading days and the current price of $152.39, is calculated at 32%. For more options contract ideas, visit StockOptionsChannel.com.
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Also see:
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- FWRG Options Chain
- CLSN Insider Buying
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
