Introduction to New Options Trading
At the dawn of September, investors witnessed the commencement of new options trading for Sanofi (SNY) pertaining to the September 20th expiry date. The essence of an option’s price determination lies in various factors, with time value holding significant weight. With 179 days left until expiration, these fresh contracts offer a chance for sellers to command a premium higher in value compared to nearer-expiry contracts.
Visualizing Opportunities
Stock Options Channel, renowned for its astute analysis, delved into the SNY options chain for the September 20th contracts and pinpointed an intriguing call contract. The $65.00 strike price call currently stands at a bid of 5 cents. Imagine an investor acquiring SNY stock at the prevailing $48.51/share rate and initiating a ‘covered call’ by selling-to-open the $65.00 call contract. This commitment involves parting with the stock at $65.00. Alluringly, factoring in the premium, could yield a total of 34.10% returns (excluding dividends) if the stock gets called away on the September 20th due date.
Exploring Potential Scenarios
However, there exists a caveat. Should Sanofi’s shares drastically surge, a chunk of potential gains might remain untapped. Thus, a prudent examination of Sanofi’s yesteryear trading performance and fundamental business metrics assumes paramount significance. A glance at the trailing twelve-month trading history of Sanofi, with the $65.00 strike highlighted in vivid red below:
Notably, the $65.00 strike represents a substantial 34% premium over Sanofi’s existing trading price, depicting it as an out-of-the-money option by that margin. This scenario posits a possibility where the covered call contract might lapse worthless, leaving the investor in possession of both their shares and the garnered premium. Presently, the analytical data suggests an 84% likelihood of this outcome transpiring. Stock Options Channel will meticulously monitor and illustrate the evolution of these probabilities over time, encapsulating the essence of the option contract’s trading history.
Assessing YieldBoost and Implied Volatility
If the covered call contract does expire in vain, the premium would offer a fractional 0.10% surge in return to the investor, translating to an annualized 0.21% boost which we term as the YieldBoost. Delving deeper, the implied volatility in the aforementioned call contract example stands at 52%. Moreover, calculating the authentic trailing twelve-month volatility (factoring in the latest 250 trading closing figures alongside the current $48.51 price) yields a figure of 28%. For additional valuable insights into put and call options contracts, a visit to StockOptionsChannel.com beckons.
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Further Reading:
Homing in on Dividend Giants Widely Held By ETFs
Tracking VEEE YTD Return
Relishing TALO Historical Stock Prices
The insights discussed herein are a reflection of the author’s perspective and do not necessarily align with those of Nasdaq, Inc.
