Exploring New Opportunities in FXN Options Trading
Investors keeping a watchful eye on the First Trust Exchange-Traded Fund II – Consumer Discretionary AlphaDex Fund Annual (Symbol: FXN) witnessed the emergence of fresh options this week for the September 20th expiration. The time value, crucial for option buyers determining prices, beckons attention with 210 days left until expiration. The new contracts offer a potential edge for puts or calls sellers to fetch higher premiums compared to nearer expirations.
A Glimpse into the Put Contract of Note
Turning to the FXN options chain, a particular put contract piqued interest. The put contract at the $16.00 strike price enticed with a current bid of 5 cents. Opting to sell-to-open that put contract commits the investor to procure the stock at $16.00, simultaneously pocketing the premium. This strategic move reduces the cost basis for the shares to $15.95 (exclusive of broker commissions). For investors eyeing FXN shares, this maneuver presents an enticing alternative to shelling out $16.80/share presently.
Strategic Implications of Strike Price Dynamics
The $16.00 strike encapsulates an approximate 5% discount from the current trading price, rendering it out-of-the-money by that margin. Consequently, there lies a possibility of the put contract expiring worthless. Present analytical data (including greeks and implied greeks) suggests a 67% chance of such an outcome. Tracking these odds in real-time promises intriguing insights, with Stock Options Channel set to publish a detailed chart on their website. If the contract meets this fate, the premium equates to a 0.31% return on the cash commitment, or a 0.54% annualized return — a metric christened by Stock Options Channel as the ‘YieldBoost.’
Delving into Historical Trading Patterns
A visual representation of the trailing twelve month trading history for First Trust Exchange-Traded Fund II – Consumer Discretionary AlphaDex Fund Annual unveils the $16.00 strike’s position in relation to past performance, denoted in green. This historical context provides essential insights for discerning investors.
The implied volatility in the put contract example above stands at 64%. Concurrently, our calculations indicate the actual trailing twelve-month volatility (based on the last 251 trading day closing values, alongside today’s price of $16.80) sits at 24%. For additional put and call options contract strategies worth exploring, StockOptionsChannel.com offers valuable insights.
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The opinions and viewpoints articulated in this piece are solely those of the author and do not necessarily align with those of Nasdaq, Inc.
