Ark Innovation ETF (Symbol: ARKK) investors entered the realm of new options this week, eyeing the June 21st expiration. With 121 days until expiration, the fresh trading contracts offer a potential avenue for sellers of puts or calls to garner a heftier premium than those available for closer expiration contracts. Stock Options Channel, home to our YieldBoost formula, scrutinized the ARKK options chain for the new June 21st contracts and pinpointed one put and one call contract that piqued our interest.
Put Contract Possibilities
At the $47.00 strike price, the put contract carries a current bid of $3.70. Should an investor opt to sell-to-open that put contract, they would be committing to acquiring the stock at $47.00, while also pocketing the premium. This would establish the cost basis of the shares at $43.30 (before broker commissions). For an investor keen on obtaining ARKK shares, this could emerge as an appealing alternative to the current $47.59/share price tag.
The Calls Side of the Option Chain
On the calls side, the call contract at the $49.00 strike price bears a current bid of $3.90. If an investor were to purchase ARKK shares at the present price level of $47.59/share and then sell-to-open that call contract as a “covered call,” they would be committing to sell the stock at $49.00. Factoring in the premium, this would generate a total return of 11.16% if the stock is called away at the June 21st expiration (before broker commissions). Naturally, there is potential for considerable upside if ARKK shares rally significantly, underscoring the importance of reviewing the fund’s trading history and business fundamentals.
Volatility Insights
The implied volatility in the put contract example stands at 42%, while in the call contract example, it is 39%. In contrast, our calculation for the actual trailing twelve-month volatility stands at 38%, considering the last 251 trading day closing values, as well as today’s price of $47.59. For additional put and call options contract ideas worth exploring, pay a visit to 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.
