As investors in Advanced Micro Devices Inc (Symbol: AMD) eyed the commencement of new options trading this week, specifically for the June 21st expiration, a plethora of opportunities and considerations unfolded. With 128 days until expiration, these newly available contracts present a ripe prospect for sellers of puts or calls to realize a higher premium compared to contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has dissected the AMD options chain for the new June 21st contracts and pinpointed a put and a call contract that are particularly intriguing.
The Put Contract Prospect
At the $175.00 strike price, the put contract currently commands a bid of $16.50. For an investor willing to sell-to-open that put contract, they’ll be committing to purchase the stock at $175.00, while also accumulating the premium, thereby establishing the cost basis of the shares at $158.50 (before broker commissions). This could offer an appealing alternative for an investor contemplating the acquisition of AMD shares, representing a 1% discount to the current trading price of the stock.
The $175.00 strike being approximately 1% below the prevailing trading price implies a 59% likelihood of the put contract expiring worthless. If it does, the premium would signify a 9.43% return on the cash commitment, or 26.89% annualized—a yield enhancement we refer to as the YieldBoost.
Visualizing the Potential
Displayed below is a chart depicting the trailing twelve-month trading history for Advanced Micro Devices Inc, underscoring the location of the $175.00 strike concerning that historical context:
The call contract at the $185.00 strike price holds a current bid of $17.55. If an investor were to purchase shares of AMD stock at the prevailing price level of $176.64/share and subsequently opt to sell-to-open that call contract as a “covered call,” they would be committing to sell the stock at $185.00. Such a maneuver could yield a 14.67% total return (excluding dividends, if any) if the stock gets called away at the June 21st expiration (before broker commissions).
The Call Contract Landscape
Of note is the 5% premium represented by the $185.00 strike concerning the current trading price of the stock, indicating a 48% likelihood of the covered call contract expiring worthless. In such a scenario, the investor would retain both their shares of stock and the collected premium, which, if the contract expires as such, would represent a 9.94% boost of extra return, or 28.34% annually—the YieldBoost.
The implied volatility in both the put and call contract examples hovers around 47%, while the actual trailing twelve-month volatility stands at 45%. For more put and call options contract ideas worth exploring, a visit to StockOptionsChannel.com is recommended.
Also see:
Services Stocks Hedge Funds Are Selling
LBTYA Historical Stock Prices
SRNA Options Chain
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
5 Stocks Our Experts Predict Could Double In the Next Year
By submitting your email, you'll also get a free pivot & flow membership. A free daily market overview. You can unsubscribe at any time.
