Unlocking New Investment Avenues
Investors tracking VanEck ETF Trust – Gold Miners ETF (Symbol: GDX) witnessed the unveiling of new options, slated for the March 2025 expiration date. These fresh offerings, with a healthy 360-day runway, bring forth a unique avenue for put or call sellers to potentially command a higher premium compared to more immediate contracts.
Delving into specifics, one intriguing scenario shines a light on the put contract pegged at the $22.00 strike price. Sporting a modest bid of 2 cents, this contract lays down an interesting proposition. By venturing into a sell-to-open strategy for this put contract, an investor essentially commits to acquiring the stock at a price of $22.00. However, the silver lining lies in collecting the premium, effectively setting the cost basis of the shares at a tantalizing $21.98 (pre-broker commissions). For prospective GDX shareholders eyeing an entry point, this presents an alluring alternative to the current market price of $30.18 per share.
Potential Pitfalls and Alluring Returns
Venturing deeper into the $22.00 strike territory, which stands at a commendable 27% discount off the current trading price, we unearth a layer of complexity. There’s a 90% chance, as per current analytical data, that this put contract may expire unexercised, rendering it worthless. An enticing proposition indeed! In the hypothetical scenario of the contract fizzling out, the premium translates into a 0.09% return over the cash infusion, or 0.09% annualized — dubbed as the esteemed ‘YieldBoost’.
Shifting gears towards the calls domain, a compelling narrative unveils itself revolving around the call contract engineered at the $40.00 strike price. Commanding a bid of $1.19, this call contract beckons investors to ponder. By merging a share purchase at the ongoing market price of $30.18 per share with the sell-to-open strategy under this call agreement, sellers commit to offloading stock at $40.00 a pop. In a dream scenario where the stock takes flight and gets called away upon the March 2025 expiration, total returns (sans dividends) could dance up to a staggering 36.48%. Yet, the prudent investor ponders over the “what ifs” as the stock’s trajectory and business fundamentals come into sharp focus.
Embracing Risk and Reward
Charting a course through the $40.00 strike landscape, marked by a 33% premium off the current trading price, unveils intriguing possibilities. There’s a 65% likelihood, per existing data trends, that this covered call contract could wind down without a flicker of exercise, allowing the investor to retain both shares and the premium snugly tucked in their pockets. Should this contract dwindle into nothingness, the premium promises to pump a 3.94% boost into the investor’s coffers, or 4.00% annualized, underlining the quintessential ‘YieldBoost’ phenomenon.
The implied volatility narrative paints a vivid picture. In the put contract sphere, it stands at 31%, while the call contract domain dances slightly higher, ticking in at 33%. Meanwhile, the tangible trailing twelve-month volatility, when considering the past 251 trading days and the current price of $30.18, locks in at a stable 30%. For a trove of additional put and call options wonders, a hop over to StockOptionsChannel.com might just be the right move.
Top YieldBoost Calls of the S&P 500
Additional Resources:
ILTB Dividend History
JCP market cap history
RRC shares outstanding history
The thoughts and views articulated here reflect the author’s opinions and do not necessarily mirror those of Nasdaq, Inc.
