Exploring Put Options Strategies
Investors in JD.com, Inc. (Symbol: JD) witnessed the introduction of new options for the May 10th expiration. Stock Options Channel’s YieldBoost formula scoured the JD options chain to spotlight one put and one call contract that stand out.
Delving into the put contract at the $23.00 strike price, with a current bid of a meager 8 cents, presents an intriguing proposition. For investors considering the sale-to-open approach for this put contract, they embrace the commitment to procure the stock at $23.00. In return, a handsome premium is theirs, effectively positioning the cost basis of the shares at $22.92 (before broker commissions). An alluring alternative to the present trading price of $27.62/share, this move offers a tantalizing 17% discount to the stock’s current value.
Should the $23.00 strike put contract lapse unnoticed at expiration, hovering at a probability of 79% according to current analytical data, it would render a minuscule 0.35% return on the cash commitment. Translated annually, this equates to a respectable 2.95% — an endeavor we aptly term the YieldBoost.
Unveiling Call Options Strategies
Transitioning to the calls facet of the option chain, the call contract at the $33.00 strike price emerged with a bid of 19 cents. Envision an investor acquiring JD shares at the current price level of $27.62/share. By executing a sell-to-open move on the call contract as a “covered call,” they willingly agree to part with the stock at $33.00. Factoring in the accrued premium, a substantial total return of 20.17% beckons if the stock finds a suitor at the May 10th expiration (discounting broker commissions).
Yet, a skyward trajectory for JD shares could potentially eclipse gains left on the table. It is therefore paramount to scrutinize JD.com, Inc.’s trailing twelve month trading history. The $33.00 strike call lays claim to a positioning that flaunts a 19% premium over the stock’s current trading price, delineating it as an out-of-the-money contender. With a calculated 69% chance of the covered call contract winding down futilely, the investor stands to retain both their stock shares and the gathered premium. Should this outcome unfold, the accrued premium translates to an extra 0.69% return for the investor. This annualizes to a noteworthy 5.84% boost, christened as the YieldBoost.
Implications of Implied Volatility
The put contract example echoes an implied volatility rate of 89%, whilst its call contract counterpart whispers of a modest 76% implied volatility. Meanwhile, the actual trailing twelve month volatility, factoring the final 251 trading day closures alongside today’s value of $27.62, paints a picture of 47%.
For those seeking further put and call options insights, a visit to StockOptionsChannel.com showcases a plethora of contract ideas ripe for exploration. As JD.com (JD) enthusiasts navigate the options landscape, steering their strategies towards these May 10th options may unveil hidden gems of opportunity in the financial firmament.
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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.
