New Options Available for Unity Software Investors: Insights and Strategies

Investors in Unity Software Inc (Symbol: U) gained access to new options this week, with a focus on the November 21st expiration date. The time value is a crucial factor influencing the price an option buyer is willing to pay. With 231 days remaining until expiration, these newly available contracts may provide a chance for sellers of puts or calls to secure higher premiums compared to contracts that expire sooner. Our YieldBoost formula at Stock Options Channel has analyzed the U options chain for these new November 21st contracts and highlighted one put and one call contract of notable interest.

Put Option Analysis: $14.00 Strike Price

The put contract at the $14.00 strike price currently has a bid of $2.08. Selling to open this put contract obligates the investor to buy shares of U at $14.00, while also collecting the premium. This results in an adjusted cost basis of $11.92 per share (before broker commissions). For investors already looking to buy shares of U, this method offers a compelling alternative to purchasing them at the current market price of $16.80.

Since the $14.00 strike price represents about a 17% discount to the current trading price, there exists a chance that this put contract could expire worthless. Current analytical data indicates a 75% probability of this occurring. Over time, Stock Options Channel will monitor these odds, publishing updates on our website related to the contract details. Should the contract expire worthless, the premium would yield a 14.86% return on the cash commitment, or an annualized return of 23.47%, a concept we refer to as the YieldBoost.

Above is a chart showcasing Unity Software Inc’s trading performance over the last twelve months, with the $14.00 strike highlighted in green.

Call Option Analysis: $19.00 Strike Price

On the call side of the options chain, the contract at the $19.00 strike price has a bid of $3.20. If an investor purchases shares of U at the current price of $16.80 and then sells to open this call contract as a “covered call,” they agree to sell the stock at $19.00. Given the premium collected, this scenario could result in a total return of 32.14% if the stock is called away at the November 21st expiration (excluding dividends and brokerage fees). However, substantial upside might remain if U’s share price significantly increases, underlining the importance of reviewing both historical trading data and business fundamentals.

The preceding chart illustrates U’s trading history over the past twelve months, with the $19.00 strike highlighted in red.

This $19.00 strike price indicates an approximate 13% premium to the current trading price of U, meaning the covered call contract could also expire worthless. In such a case, the investor would retain their shares along with the collected premium. Current analytical insights suggest there is a 44% chance of this outcome. We will continue to track these odds and provide updates on our website under the contract detail page, including a chart of the trading history for the option contract. If the covered call does expire worthless, the investor would see a 19.05% increase in total returns or 30.09% annualized, known as the YieldBoost.

The implied volatility for the put contract example stands at 75%, while the call contract’s implied volatility is at 70%. We calculated the actual trailing twelve-month volatility to be 68%, based on the last 251 trading days and today’s price of $16.80. For additional put and call options contract ideas, visit StockOptionsChannel.com.

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