Discovering New Investment Avenues

Investors keeping a sharp eye on Cisco Systems Inc (Symbol: CSCO) were presented with intriguing possibilities this week as fresh options emerged for the March 2025 expiration. The allure of these contracts lies in the time value, with 371 days remaining until expiration. These new options offer a unique chance for put or call sellers to fetch a premium higher than what nearer-expiry contracts would yield. Delving into the intricacies of options trading, our YieldBoost formula at Stock Options Channel meticulously examined the CSCO options chain for the upcoming March 2025 contracts. In this hunt, a put and a call contract stood out, brimming with potential.

Analyze the Put Side

Exploring the put side, a contract at the $45.00 strike beckons with a current bid of $2.33. By taking the bold step to sell-to-open this put contract, investors undertake a commitment to buy the stock at $45.00, while pocketing the premium. This move sets the cost basis of the shares at $42.67 (prior to broker commissions). For prospective CSCO shareholders, this could emerge as an appealing alternative to the prevailing price of $49.32 per share.

Delving Into Stock Movements

As the $45.00 strike represents a tempting 9% markdown from the current trading price (meaning it is out-of-the-money by that percentage), there exists a chance that the put contract might expire without value. Present data, inclusive of greeks and implied greeks, hint that the likelihood of this outcome stands at 72%. Stock Options Channel, vigilant as ever, will monitor these odds over time, illustrating the fluctuations in a comprehensive chart on our website. Should the contract dwindle into worthlessness, the premium would translate into a 5.18% return on the cash commitment, or 5.09% annualized, a metric we affectionately term as the YieldBoost.

Directing our gaze to the calls segment of the options chain, a call contract at the $52.50 strike is in the spotlight with a bid of $3.30. An investor purchasing CSCO shares at the current price of $49.32 per share and subsequently selling-to-open this call contract in a “covered call” strategy commits to selling the stock at $52.50. The call seller stands to accrue the premium, culminating in a potential total return (ex-dividends) of 13.14% if the stock elopes away at the March 2025 expiration (before broker commissions). Naturally, an overwhelming upside might remain untapped if CSCO shares chart a lofty course. This underlines the importance of scrutinizing Cisco Systems Inc’s trading history over the last twelve months alongside the business fundamentals. Illustrated below is a chart capturing CSCO’s trading narrative for the trailing twelve months, emphasizing the $52.50 strike in vibrant red.

It’s noteworthy that the $52.50 strike stands as an appetizing 6% surplus to the current stock price, rendering it out-of-the-money by that margin. This accentuates the impending possibility that the covered call contract might wither into oblivion, allowing the investor to retain both shares and the premium garnered. Present analytical data, containing greeks and implied greeks, indicate a 53% likelihood of this occurrence.

If the covered call contract drifts away into worthlessness, the premium would usher in a 6.69% supplementary return for the investor, or a 6.58% annualized gain, referred to fondly as the YieldBoost. The implied volatility for the put contract mirrors 25%, while the call contract example treads slightly lower at 22%. Calculating the actual trailing twelve-month volatility, pegged at 20%, employs the last 251 trading day concluding figures, alongside today’s stock price of $49.32.

For further insights into compelling put and call options ideas worth exploring, a visit to StockOptionsChannel.com should be on the agenda.

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Additional Resources

Expand your scope with these valuable resources:

• Socially Responsible Preferreds
• Institutional Holders of GCBC
• PPG MACD

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.