Investors in New York Community Bancorp Inc. (Symbol: NYCB) witnessed the triggering of new options trading on October 18th.
Exploring Time Value Opportunities
With 246 days until expiry, the time value embedded in the new contracts offers a prospective chance for sellers of puts or calls to garner a higher premium compared to contracts with a nearer expiry.
At Stock Options Channel, our YieldBoost formula scrutinized the NYCB options chain for the newly introduced October 18th contracts, highlighting one put and one call contract that deserve scrutiny.
Seizing Discounted Puts
The $4.50 strike put contract is currently bid at $1.35. Selling-to-open this put contract commits the investor to acquire the stock at $4.50 while pocketing the premium, thereby setting the cost basis of the shares at $3.15 (before broker commissions).
This represents an alluring alternative to purchasing shares at the current $4.76/share price point, offering a 5% discount to the trading price of the stock.
The prospect of the put contract expiring worthless is backed by current analytical data, suggesting a remarkable 99% odds of this outcome. An instrumental aspect of our investigation will be monitoring these dynamic odds over time, presenting a chart of these numbers on our website under the contract detail page.
The Call Conundrum
On the calls side, the call contract at the $5.00 strike carries a current bid of $1.35. Opting for a “covered call,” wherein an investor purchases shares at the current $4.76/share price and then sells-to-open the call contract, commits to sell the stock at $5.00, potentially yielding a return of 33.40% if the stock gets called away at the October 18th expiry (before broker commissions).
Examining the trailing twelve month trading history for New York Community Bancorp Inc. and the placement of the $5.00 strike in red underscores the approximate 5% premium of this call contract to the current trading price of the stock, defining it as out-of-the-money by that percentage.
Delving into the upside reveals the possibility of the covered call contract expiring worthless, supported by the current analytical data which posits 99% odds of this occurrence.
Calibrating Volatility and Building Conviction
The actual trailing twelve month volatility is calculated to be 78%, considering the last 251 trading day closing values along with today’s price of $4.76.
Investors on the lookout for more put and call options contract ideas can explore StockOptionsChannel.com for further insights into the nuanced world of NYCB options trading.
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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.
