An Opportune Week for Investors
Investors tracking Plains All American Pipeline LP (Symbol: PAA) have an exciting week ahead with the emergence of new options for the November 15th expiration date. As we embark on this journey, let’s delve into the intricacies of these options and the potential opportunities they present.
Striking Gold: The Put Contract
Amidst these new options lies a put contract at the $17.00 strike price, currently valued at 85 cents. For those investors looking to purchase PAA shares, selling-to-open this put contract could be a compelling prospect. By committing to buy the stock at $17.00, albeit with the added benefit of collecting the premium, investors could secure a cost basis of $16.15 per share. A tantalizing proposition indeed, especially considering the current trading price of $17.79 per share.
The Dynamic Call Contract
On the flip side, the call contract at the $20.00 strike price beckons, commanding a bid of 30 cents. Entering into a “covered call” strategy by buying PAA stock at the present price and then selling this call contract offers a unique opportunity. Committing to sell the stock at $20.00, in addition to the premium collected, could potentially yield a total return of 14.11% at the November 15th expiration. However, caution is advised as leaving significant upside on the table remains a possibility if PAA shares surge unexpectedly.
Deciphering the Analytics
Analytical data, including greeks and implied greeks, shed light on the odds of these contracts expiring worthless. The $17.00 put contract presents a 62% chance, while the $20.00 call contract shows a 75% likelihood. It is imperative to monitor these odds over time to gauge their evolution accurately. The implied volatility for the put and call contracts stands at 23% and 21%, respectively, adding another layer of complexity to the trading landscape.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
