The first week of PACB April 19th options trading brings forth new opportunities and intrigues for savvy investors. The Stock Options Channel introduces the YieldBoost formula, pioneering a thorough analysis of the PACB options chain. Among the newly surfaced April 19th contracts, one put and one call contract caught the discerning eye of options aficionados.
A Glimpse into Put Options
Amidst the host of options, a put contract at the $6.00 strike price stands out with a current bid of 60 cents. For those willing to sell-to-open this put contract, they take on the commitment to purchase the stock at $6.00 while reaping the premium, effectively establishing the cost basis of the shares at $5.40 (before broker commissions). A compelling alternative, offering an attractive departure from the present $6.30/share price point. This $6.00 strike marks an enticing 5% discount to the current trading price of the stock, positioning it tantalizingly ‘out-of-the-money’ by that percentage. The current odds suggest a 63% likelihood that the put contract would expire worthless, providing fertile ground for tracking these odds over time. Should the contract wind down fruitlessly, the premium would yield a 10.00% return on the cash commitment or 57.97% annualized—a touch we affectionately deem as the ‘YieldBoost’.
Charting the Course for Calls
Steering towards the calls domain, the call contract at the $7.00 strike price commands attention with a current bid of 55 cents. Delving into this call contract, we envision an investor purchasing shares of PACB stock at the current $6.30/share and subsequently venturing to sell-to-open that call contract. In doing so, they commit to vend the stock at $7.00. This move, intriguingly referred to as a “covered call,” promises a total return (dividend-free) of 19.84% should the stock get called away at the April 19th expiration, preceding broker commissions. Rightfully so, questions linger on the potential foresightedness of this move, especially if PACB shares catapult skyward—a reflection that urges a closer examination of PACB’s 12-month trading history. The $7.00 strike viewed through the lens of historical trading is highlighted in a striking red hue. This $7.00 strike stakes its claim as an 11% premium to the current trading price, avowing its ‘out-of-the-money’ charm. These odds of the covered call contract expiring worthlessly stand at 57%, beckoning observers to trail these odds over time, culminating in an artfully crafted chart. The premium in the event of a fruitless expiration would sprinkle an additional 8.73% return to the investor or 50.61% annualized, a phenomenon affectionately christened as the ‘YieldBoost’.
Unveiling the Implied Volatility
The implied volatility in both the put and call contracts looms at approximately 86%. In stark contrast, the actual trailing twelve month volatility checks in at 70%, calculated against the last 251 trading day closing values coupled with today’s price of $6.30. These contrasting volatilities shine a light on the intricate nuances of options trading, a complex ecosystem pulsating with myriad possibilities. For a treasure-trove of put and call options contract ideas, one cannot overlook the wealth of insights nestled within 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.
