Today marked a noteworthy event for investors in Cardinal Health, Inc. as new options kicked off for the April 19th expiration. Stock Options Channel utilized its YieldBoost formula to scrutinize the CAH options chain for the new April 19th contracts and pinpointed one put and one call contract worth delving into.
Interesting Put Contract
An eye-catching put contract surfaced at the $100.00 strike price with a current bid of $1.05. Selling-to-open that put contract would mean committing to purchase the stock at $100.00. However, the investor would also receive the premium, leading to a cost basis of $98.95 per share (before broker commissions). For an investor considering buying shares of CAH, this could present an appealing alternative to today’s $104.47/share price.
Notably, the $100.00 strike holds an approximately 4% discount to the current trading price of the stock (i.e., it is out-of-the-money by that percentage), hinting at the possibility of the put contract expiring worthless. Current analytical data indicate a 99% likelihood of this outcome. Stock Options Channel will keep track of these odds over time and showcase them on their website. The premium would then represent a 1.05% return on the cash commitment or a 5.99% annualized return — dubbed by Stock Options Channel as the YieldBoost.
Attached is a chart depicting the trailing twelve-month trading history for Cardinal Health, Inc., highlighting the $100.00 strike in green.
Promising Call Contract
On the calls side, a call contract at the $105.00 strike price stood out with a current bid of $2.70. Purchasing shares of CAH at the current price level of $104.47/share and selling-to-open that call contract as a “covered call” would entail committing to sell the stock at $105.00. Factoring in the premium, this would result in a total return of 3.09% if the stock gets called away at the April 19th expiration (before broker commissions).
However, there’s a potential downside if CAH shares considerably surge, leaving substantial upside on the table. Hence, delving into the trailing twelve-month trading history for Cardinal Health, Inc., as well as studying the business fundamentals, becomes crucial. Below is a chart illustrating CAH’s trailing twelve-month trading history, with the $105.00 strike highlighted in red.
Additionally, the $105.00 strike represents an approximate 1% premium to the current trading price of the stock (i.e., it is out-of-the-money by that percentage). This also hints at the possibility of the covered call contract expiring worthless, where the investor would retain both their shares of stock and the premium collected. The current analytical data indicate a 99% likelihood of this outcome. Stock Options Channel will monitor these odds over time and showcase them on their website. If the covered call contract expires worthless, the premium would represent a 2.58% extra return to the investor or a 14.75% annualized return, termed as the YieldBoost.
Moreover, the actual trailing twelve-month volatility is calculated to be 21%, considering the last 251 trading day closing values as well as today’s price of $104.47. For more put and call options contract ideas worth exploring, visit 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.
