Unveiling New Options for May 10th
Investors eyeing Plains All American Pipeline LP (Symbol: PAA) were presented with a compelling investment avenue today as new options surfaced for the upcoming May 10th expiration date. Stock Options Channel, famed for its analytical prowess, scrutinized the PAA options chain using its YieldBoost formula, zeroing in on a specific put contract that warrants attention.
A Potentially Profitable Put Option
Nestled at the $17.00 strike price, the put contract beckons with a bid of a mere 5 cents. Venturing to sell-to-open this put contract signifies a commitment to buying the stock at $17.00. However, this commitment is cushioned by collecting the premium, ultimately setting the cost basis of the shares at $16.95 (adjusting for broker commissions). For an investor eyeing PAA shares, this could manifest as a tantalizing alternative to the current $17.45/share price tag.
Calculated Risks and Rewards
With the $17.00 strike reflecting a modest 3% discount from the prevailing trading price of the stock, the put contract is technically out-of-the-money by that percentage. This positioning denotes the potential for the put contract to expire worthless. Presently, analytical data, including greeks and implied greeks, indicate a 59% probability of such an outcome. Stock Options Channel will diligently monitor these odds, illuminating any fluctuations by charting them on their website under the contract detail page. In the event of a worthless expiry, the premium would yield a 0.29% return on the cash commitment, translating to a respectable 2.50% annualized return—a phenomenon Stock Options Channel affectionately labels as the YieldBoost.
Visualizing the Journey
A chart showcasing the trailing twelve-month trading history of Plains All American Pipeline LP is provided below, accentuating the $17.00 strike’s placement in relation to this historical backdrop:
The implied volatility in the aforementioned put contract example stands at 51%, whereas the actual trailing twelve-month volatility (comprising the last 251 trading day closing values alongside today’s price of $17.45) registers at 21%. For additional put and call options contract insights well worth exploring, a visit to StockOptionsChannel.com is highly recommended.
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The perspectives and sentiments shared here are those of the author and do not necessarily mirror those of Nasdaq, Inc.
