New Options Available for CF Industries Holdings: An Overview for Investors
Investors in CF Industries Holdings Inc (Symbol: CF) now have new options available as of today, with contracts set to expire on December 20th. Using our YieldBoost formula at Stock Options Channel, we’ve analyzed the CF options chain to highlight a notable put and call contract.
Attractive Put Option Offering
The put option at the $80.00 strike price has a current bid of 30 cents. For investors looking to sell-to-open this put contract, they would agree to buy the stock at $80.00, while also collecting the premium, lowering their cost basis to $79.70 (not including broker fees). For those already considering purchasing CF shares at the current price of $84.93, this option may appeal as a more attractive alternative.
This $80.00 strike price represents about a 6% discount to current stock prices, making it out-of-the-money by that percentage. There’s a significant chance the put contract could expire without value, with analytical data suggesting a 71% probability of this occurring. Over time, Stock Options Channel will track these odds and present them on our website under the contract detail page. Should the contract indeed expire worthless, the collected premium would result in a 0.38% return relative to the cash commitment, or an annualized rate of 2.14%, a metric we refer to as YieldBoost.
Below is a chart displaying CF Industries Holdings Inc’s trailing twelve-month trading history, highlighting where the $80.00 strike is positioned:
Potential Returns with Covered Call Option
On the calls side, there is a call contract available at the $90.00 strike price, which has a current bid of $1.40. If an investor buys shares of CF at the current price of $84.93 and sells-to-open this call contract as a “covered call,” they would be agreeing to sell the stock at $90.00. This action would generate a total return (excluding any dividends) of 7.62% if the stock is called away at the December 20th expiration.
However, if CF shares appreciate significantly, the seller may miss out on some upside potential. Thus, reviewing CF Industries Holdings’ past trading behavior and fundamentals is essential. Below is a chart that illustrates the company’s trailing twelve-month trading history, with the $90.00 strike highlighted:
The $90.00 strike price indicates a 6% premium over the current trading price, meaning it is also out-of-the-money by that same percentage. There’s a 63% chance that this covered call may expire worthless, allowing the investor to retain their shares and the premium collected. Stock Options Channel will monitor this likelihood over time and display updated figures on our website.
If the covered call were to expire without value, the collected premium would add a 1.65% boost to the investor’s return, or an annualized 9.40%, which is also classified as YieldBoost.
Both the put and call contracts reflect an implied volatility of approximately 32%. In contrast, we calculate the actual trailing twelve-month volatility (based on the last 251 trading days and the current price of $84.93) to be around 27%. For additional ideas on put and call options, visit StockOptionsChannel.com.
Explore Top YieldBoost Calls of the S&P 500 »
Additional Resources:
• Monthly Dividend Paying Stocks
• Institutional Holders of PAEU
• Institutional Holders of VGFC
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
