A New Frontier in Options Trading
As trading activity unfolds this week, stockholders of Snowflake Inc (Symbol: SNOW) are presented with fresh opportunities. For the February 16th expiration, a pair of options contracts – one put and one call – have garnered considerable attention from market participants.
Exploring the Put Option
A put contract at the $215.00 strike price has newly surfaced with a current bid of 9 cents. Investors eyeing this option are contemplating the prospect of acquiring the stock at $215.00, albeit collecting the premium, which would effectively set the cost basis of the shares at $214.91. This stands as an appealing alternative to the present $231.00/share price tag.
A Window of Opportunity
The $215.00 strike underscores an approximately 7% markdown from the current trading price – meaning it is out-of-the-money by that percentage. Accordingly, there is a possibility that the put contract may expire without value. As per current analytical data, the likelihood of such an outcome looms at 99%. Stock Options Channel will vigilantly monitor these odds over time and visualize them through a dedicated chart on their website. Should this contract conclude worthless, the premium would yield a 0.04% return on the cash commitment, or 15.28% annualized – a phenomenon that we at Stock Options Channel refer to as the YieldBoost.
Unpacking the Call Option
On the contrary, the calls side of the option chain introduces the call contract at the $232.50 strike price, which is currently bid at $2.09. For those who elect to purchase SNOW shares at the existing $231.00/share level and subsequently sell-to-open that call contract as a “covered call,” they would essentially agree to offload the stock at $232.50. This approach would drive a total return of 1.55% if the stock is called away at the February 16th expiration (before broker commissions).
Charting the Future
There is a potential trade-off, however, as substantial upside could be forfeited if SNOW shares surge. Therefore, a thorough examination of Snowflake Inc’s trailing twelve-month trading history, combined with a scrutinization of the business fundamentals, becomes of paramount importance. The $232.50 strike is strategically placed, representing an approximate 1% premium to the current trading price – indicating it is out-of-the-money by that percentage. As per current data, the odds of the covered call contract expiring without value stand at 58%. Stock Options Channel will diligently observe and graph the evolution of these odds.
Diving into Volatility
The realm of implied volatility in the put contract scenario stands at 75%, contrasting the 61% figure in the call contract scenario. Trailing twelve-month volatility, taking into account the previous 251 trading day closing values in addition to the current price of $231.00, tallies at 51%. Investors seeking further exploration of put and call options contract ideas are encouraged to peruse StockOptionsChannel.com.
Imagination Unfettered
Delving into this niche undoubtedly requires an imaginative spirit, with unbounded opportunities standing at each turn. The predictability and unpredictability, the essence and insignificance – all interwoven in the fabric of the market. As the options trading landscape continues to evolve, so too do the opportunities for both risk and reward.
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Also see:
Stock Split History
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Top Ten Hedge Funds Holding TRX
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
