When it comes to options trading, investors are always on the lookout for new opportunities. Today, a fresh window of possibilities has opened for FedEx Corp (Symbol: FDX) with the commencement of options trading for the May 17th expiration. With 91 days until expiration, these new contracts offer a unique avenue for sellers of puts or calls to potentially secure a higher premium than what would be available for contracts with a closer expiration.
New Options Unveiled
At Stock Options Channel, our YieldBoost formula has scrutinized the FDX options chain for the new May 17th contracts and identified one put and one call contract that stand out from the rest.
Potential with Put Contracts
Looking at the put contract with a $230.00 strike price shows a current bid of $9.10. For an investor willing to sell-to-open that put contract, they would be committing to purchase the stock at $230.00 while also collecting the premium, thereby placing the cost basis of the shares at $220.90 (before broker commissions). This could present an appealing alternative for an investor eyeing FDX shares, potentially avoiding the need to pay $234.95 per share at the current valuation.
Moreover, given that the $230.00 strike represents an approximately 2% discount to the current trading price of the stock, the put contract also carries the possibility of expiring worthless. Analytics currently indicate a staggering 99% chance of this outcome. The premium from such an event would stand for a 3.96% return on the cash commitment, or 15.88% annualized – what we, at Stock Options Channel, refer to as the YieldBoost.
The Call Contract Perspective
Shifting focus to the calls side of the option chain, the call contract at the $240.00 strike price reveals a current bid of $10.35. If an investor were to purchase shares of FDX stock at the current price level of $234.95/share and then sell-to-open that call contract as a “covered call,” they would be committing to selling the stock at $240.00. This maneuver could drive a total return (excluding dividends, if any) of 6.55% if the stock gets called away at the May 17th expiration (before broker commissions).
However, there is a caveat. Should FDX shares significantly surge, there is a risk of missing out on potential upside gains. This underscores the importance of observing the trailing twelve-month trading history for FedEx Corp and delving into the business fundamentals.
Assessing Probabilities and Returns
It’s noteworthy that the $240.00 strike represents an approximate 2% premium to the current trading price of the stock, signaling an out-of-the-money scenario. Similar to the put contract, there is a 99% likelihood, as per current analytical data, that the covered call contract would expire worthless. Should this unfold, the investor would retain both their shares of stock and the premium collected. In this event, the premium would represent a 4.41% boost of extra return to the investor, or 17.68% annualized – our reference as the YieldBoost.
Market Volatility and Beyond
Amidst all this, the actual trailing twelve-month volatility is calculated at 26%. For more put and call options contract ideas worth exploring, a visit to StockOptionsChannel.com might just unveil interesting possibilities.
Inviting readers to check out our top YieldBoost calls of stocks analysts like, it’s also beneficial to delve into CCT Videos, Becton Dickinson and 13F Filers, and FRTA shares outstanding history. Lastly, it’s important to note that the views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
