New Opportunities for Option Traders

This week, a fresh wave of enthusiasm emerged among investors eyeing Republic Services Inc (Symbol: RSG), with new options paving the way for potential profits. The October 18th expiration date marked the commencement of new options trading, stirring up excitement and presenting an intriguing prospect for option sellers and buyers alike. With 245 days until expiration, these contracts offer a unique window for premium collection, enhancing returns, and tapping into unforeseen possibilities for shrewd investors.

Potential Gains from the Put Option Contract

One particularly interesting prospect lies in the put contract at the $160.00 strike price, carrying a current bid of $2.05. By venturing into the realm of selling-to-open this put contract, investors could lock in the stock purchase at $160.00 while pocketing the premium, thus reducing the cost basis of the shares to $157.95 (pre-broker commissions). For those eyeing RSG shares, this method presents an appealing avenue, offering an alternative to the current trading price of $180.38/share.

With the $160.00 strike standing as an approximately 11% discount to the current stock price, the put contract also holds a 90% chance of expiring worthless, as indicated by the current analytical data. This could entail a 1.28% return on the cash commitment, or an annualized yield of 1.91% — a phenomenon we at Stock Options Channel fondly term as the YieldBoost.

Insights into the Call Option Contract

Shifting focus to the calls section, the call contract at the $185.00 strike price put forth an alluring bid of $7.10. Delving into the realm of selling a “covered call” post purchasing RSG shares at the present $180.38/share, investors could commit to selling the stock at $185.00. This strategic maneuver would yield a total return of 6.50% at the October 18th expiration, excluding dividends, if any. However, it might leave potential upside on the table should RSG shares surge to unforeseen heights.

Given that the $185.00 strike echoes an approximate 3% premium to the current trading price, the covered call contract could expire worthless, with a 46% chance, offering a 3.94% additional return boost to the investor. This translates to a 5.87% annualized yield, which aligns perfectly with the essence of the YieldBoost.

Volatility and Financial Reflections

The implied volatility stands at 22% for the put contract example and 16% for the call contract example. Meanwhile, the actual trailing twelve month volatility computes at 14%, based on the last 251 trading day closing values. For more put and call options contract ideas worth exploring, one would find a wealth of insights at StockOptionsChannel.com.

Remixed Reference Points: Blue Chips and Hedge Funds

Also see:

• Blue Chip Dividend Stocks Hedge Funds Are Buying

• Funds Holding HTGM

• REMI Insider Buying

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.