The Intriguing Put Option
Investors eyeing iShares Trust – Core MSCI Total International Stock Exchange Traded Fund (Symbol: IXUS) this week were introduced to new options expiring on November 15th. The allure of these longer-term contracts lies in the element of time – with 241 days remaining until expiration, sellers of puts or calls have the chance to fetch higher premiums compared to options with a closer expiration date.
The Potential Put Contract Play
One notable put contract that emerged was the $65.00 strike price with a current bid of 65 cents. By selling-to-open this put contract, an investor would be obligating themselves to buy the stock at $65.00. However, factoring in the premium received would effectively reduce the cost basis to $64.35 per share (before any fees). For those already contemplating purchasing IXUS shares, this presents an enticing alternative to the current price of $66.89 per share.
A Gamble with the Put
The $65.00 strike sits at a roughly 3% discount to the current trading price, indicating it is out-of-the-money by that margin. As per current data, the likelihood of the put expiring worthless stands at 62%. Stock Options Channel will monitor and update these odds over time, providing valuable insights for investors.
Visualizing the History
A graphical representation of the trailing twelve-month trading history for iShares Trust – Core MSCI Total International Stock Exchange Traded Fund is shown below, highlighting where the $65.00 strike rests in relation to the historical performance.
The Fascination of the Call Option
On the calls side, attention was drawn to the call contract at the $69.00 strike, boasting a current bid of $1.00. Buyers purchasing IXUS shares at the current price and executing this call as a “covered call” are committing to selling the shares at $69.00. This strategic move, along with collecting the premium, could yield a total return of 4.65% if shares are called away at expiration.
The Upside of the Call
While a significant return is on the table, a soaring market could leave potential gains unrealized. Delving into the trailing twelve-month trading history and understanding the business fundamentals are crucial for informed decisions. Refer to the chart below for a visual representation of IXUS’s trading performance with the $69.00 strike highlighted.
Exploring Probabilities
The $69.00 strike achieves a premium of about 3% over the current trading price, implying it is out-of-the-money by that margin. The chance of the covered call contract expiring worthless is currently pegged at 61%, subject to changes over time – insights that Stock Options Channel tracks diligently.
The Implied and Actual Volatility
Implied volatility stands at 20% for puts and 19% for calls, contrasting with the trailing twelve-month volatility calculated at 13%. For a deeper dive into potential put and call option strategies, StockOptionsChannel.com offers valuable insights and ideas.
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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.
