New Options for EHang Holdings: Assessing Potential Trades
Investors in EHang Holdings Ltd (Symbol: EH) observed fresh options trading this week, focusing on contracts expiring on May 16th. Utilizing our YieldBoost formula at Stock Options Channel, we analyzed the EH options chain and identified noteworthy put and call contracts.
Examining the Put Contract Opportunity
The put contract at the $16.00 strike price currently bids at $1.35. By selling-to-open this put, an investor commits to buy the stock at $16.00 while collecting the premium, which lowers the effective cost basis to $14.65 (before brokerage commissions). For those looking to acquire shares of EH, this strategy can be more appealing than purchasing the stock at the current price of $16.58 per share.
This $16.00 strike represents an approximate 4% discount to the current stock price (it is out-of-the-money by that percentage). Analysts estimate a 64% chance that the put will expire worthless. Over time, Stock Options Channel will monitor these odds and publish relevant charts on our website under the contract detail page. If the contract expires worthless, the premium yields an 8.44% return on the cash commitment, or a substantial 73.33% annualized return—an instance of what we term the YieldBoost.
Trailing Twelve-Month Trading History
Below is a chart illustrating EHang Holdings Ltd’s trading history over the past twelve months, with the $16.00 strike highlighted in green:
Evaluating the Call Contract Potential
Shifting to the call options, the contract at the $17.00 strike price currently bids at $1.85. An investor could buy shares of EH at the current price of $16.58 per share and sell-to-open this call contract as a “covered call.” This action would lock in a commitment to sell the stock at $17.00 while collecting the premium, leading to a total return (excluding dividends, if any) of 13.69% if the stock is called away at expiration on May 16th (before broker commissions).
However, substantial upside remains should EH shares rise significantly. Therefore, it’s critical to analyze both the historical trading data and the company’s fundamentals. The chart below displays EHang’s trailing twelve-month trading history with the $17.00 strike marked in red:
The $17.00 strike price is roughly a 3% premium to the current stock price (thus out-of-the-money by that percentage). As such, there exists a 44% chance that the covered call contract will expire worthless. If this occurs, the investor retains both their shares and the collected premium. Current analyses point to a compelling 11.16% extra return on the investor’s cash commitment, or an impressive 96.97% annualized yield—again referred to as the YieldBoost.
Volatility Insights
Implied volatility for the put contract stands at 87%, while the call contract shows 84%. In contrast, our assessment of actual trailing twelve-month volatility—based on the last 251 trading days and the current price of $16.58—reveals a rate of 79%. For further ideas on put and call options contracts, visit StockOptionsChannel.com.
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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.
