Exploring Put and Call Options

Today, as investors in EXACT Sciences Corp. (Symbol: EXAS), witness the availability of new options for the June 21st expiration date, a realm of lucrative opportunity opens up. Encapsulated in the pricing dynamics of these options is the essence of time value. With 93 days remaining until expiration, these fresh contracts present a potential window for sellers of puts or calls to garner a more substantial premium compared to contracts with closer expiration dates.

Delving into the Put Contract

At a bid of $4.80, the put contract with a strike price of $60.00 beckons. Opting to sell-to-open this put contract means committing to buying the stock at $60.00. In return, the investor pockets the premium, effectively setting the cost basis of the shares at $55.20 (pre-broker commissions). For an investor eyeing EXAS shares, this offers a compelling alternative to the current market price of $60.83.

The Call Contract Perspective

On the other end of the spectrum lies the call contract at a strike price of $62.50 with a bid of $5.70. By purchasing shares at the prevailing price of $60.83 and executing a “covered call” strategy by selling this call contract, investors commit to selling the stock at $62.50. This maneuver opens up a potential total return of 12.12% if the shares are called away by the June 21st expiration (pre-broker commissions).

Assessing Probabilities and Returns

An intriguing dance of odds and returns unfolds with the $60.00 put and $62.50 call contracts. The put contract exhibits a 60% chance of expiring worthless, while the call contract showcases a 45% likelihood. Should either meet this fate, investors stand to gain extra return. The premium from an expired call contract would yield a 9.37% boost, or 36.78% annualized in extras.

Volatility Insights

Implied volatility reigns at 60% for the put contract and 59% for the call contract. Meanwhile, the tangible trailing twelve-month volatility, considering the preceding 251 trading days closing values along with the current price of $60.83, stands at 44%. For a treasure trove of additional put and call options contract ideas, a visit to StockOptionsChannel.com is a must.

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