New Options Trading for Installed Building Products Inc: Key Insights
Investors in Installed Building Products Inc (Symbol: IBP) witnessed the launch of new options this week, set to expire on March 21st. Through our YieldBoost formula at Stock Options Channel, we’ve analyzed the options chain for IBP and identified two contracts worth noting: one put and one call.
Put Contract Overview
The put contract at a $170.00 strike price has a current bid of $6.00. If an investor decides to sell-to-open this put contract, they commit to purchasing the stock at $170.00. Additionally, they would collect the premium, lowering their effective cost basis to $164.00 (excluding broker commissions). For investors considering a purchase of IBP shares currently trading at $172.41, this offers a potentially appealing alternative.
This $170.00 strike price represents about a 1% discount from the present trading price, meaning it is currently out-of-the-money by that percentage. Current analytical data indicates there is a 58% chance this put contract may expire worthless. We will continue to track these odds over time, publishing updates on our website under the contract detail page for this option. Should the contract expire worthless, the premium would equate to a 3.53% return on the initial cash commitment, or an annualized rate of 58.67%, which we term the YieldBoost.
Historical Trading Performance
Below is a chart illustrating the trailing twelve-month trading history for Installed Building Products Inc, with the $170.00 strike price highlighted in green:
Call Contract Analysis
On the call side, the contract at a $195.00 strike price currently bids at 60 cents. If an investor buys shares of IBP at $172.41 and sells-to-open this call as a “covered call,” they would be committing to sell the stock at $195.00. By collecting the premium, this arrangement could yield a total return of 13.45% if the stock is called away by the March 21st expiration (prior to any broker commissions). However, significant upside might exist if IBP shares appreciate significantly, which emphasizes the importance of evaluating both historical trading performance and business fundamentals.
The trailing twelve-month trading history for IBP, along with the $195.00 strike mark highlighted in red, is shown below:
The $195.00 strike price represents approximately a 13% premium compared to the current trading price of $172.41, thus it is out-of-the-money by about that same percentage. It is also possible that this covered call would expire worthless, allowing the investor to retain the shares and the premium collected. Current analysis indicates a strong 81% chance of this occurring. We will monitor and update the odds on our website under the contract detail page.
Should the covered call contract expire without being executed, the premium would provide an extra 0.35% return to the investor, equating to a 5.78% annualized return, referred to as the YieldBoost.
Implied Volatility and Market Insights
The implied volatility for the put contract stands at 56%, while the call contract has an implied volatility of 50%. Meanwhile, our analysis of the actual trailing twelve-month volatility, considering the last 250 trading day closing values alongside today’s price of $172.41, is calculated to be 44%. For more options contract ideas, visit StockOptionsChannel.com.
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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.
