Unveiling the VEU Options Frontier
Investors delving into the intricacies of the Vanguard International Equity Index Funds – FTSE All-World ex-USA Index Fund ETF (Symbol: VEU) have witnessed the advent of new options trading during this trading week, specifically for the May 17th expiration. At Stock Options Channel, our YieldBoost formula meticulously sifts through the VEU options landscape, uncovering intriguing opportunities within the new May 17th contracts, singling out a put and call contract worth exploring further.
Diving into the specifics, the put contract at the $56.00 strike price currently commands a bid of 5 cents. Opting to sell-to-open this put contract entails committing to acquiring the stock at $56.00, offset by collecting the premium. This transaction sets the stage with a cost basis of $55.95 per share (pre-broker commissions). To a discerning investor eyeing VEU shares, this could provide a compelling alternative to current prices at $57.80/share.
Finding the Sweet Spot
As the $56.00 strike reflects a roughly 3% markdown from the prevailing trading price of the stock, positioning it out-of-the-money by that margin, the put contract carries the prospect that it might expire valueless. Statistical insights, encompassing greeks and implied greeks, estimate the current odds of such an outcome at 75%. Stock Options Channel stands vigilant, monitoring these probabilities to gauge their evolution over time and will portray them graphically on our website, specifically under the contract detail page. An inexistent expiration would translate to the premium yielding a 0.09% boost on the cash commitment or 0.55% annualized — christened by us as the YieldBoost.
Call Contracts into Action
Shifting focus to the calls dimension of the option chain, the call agreement at the $60.00 strike level commands a bid of 30 cents. Should an investor acquire VEU shares at the current $57.80/share and proceed to sell-to-open this call contract as a “covered call,” they would be committing to offload the stock at $60.00. This maneuver, with the call seller receiving the premium, could culminate in a total return of 4.33% if the stock is called away at the May 17th expiration (pre-broker commissions). It’s worth noting that significant upside potential might remain untapped if VEU shares embark on a meteoric rise. Observing Vanguard International Equity Index Funds’ twelve-month trading history, coupled with a scrutiny of fundamental business aspects, emerges as a judicious exercise. Refer to the chart below depicting VEU’s trailing twelve-month trading history, with the $60.00 strike underscored in red.
Considering the $60.00 strike represents a roughly 4% premium to the prevailing trading price, locating it out-of-the-money by that percentage, the covered call contract harbors the possibility of expiring valueless. Should this scenario materialize, the investor retains both their stock holdings and the premium. Statistical indicators, encompassing greeks and implied greeks, peg the current odds of such an event at 75%. At Stock Options Channel, we vow to track these probabilities diligently, illustrating their trajectory over time through graphical representations. An expired covered call contract would furnish the investor with a premium-enhanced return of 0.52%, or 3.21% annualized, a phenomenon termed the YieldBoost.
The implied volatility for the put and call contracts approximates 15%. Meanwhile, calculating the actual trailing twelve-month volatility, factoring in the closing values of the past 251 trading days alongside today’s pricing at $57.80, yields a 13% estimate. For additional put and call options contract inspirations worth exploring, visit StockOptionsChannel.com.
Top YieldBoost Calls of the S&P 500 »
Also see:
- PTC market cap history
- FIZZ Insider Buying
- INWK YTD Return
The views and opinions expressed herein are those of the author and do not necessarily reflect the thoughts of Nasdaq, Inc.
