New KKR Options Offer Investment Opportunities for Investors
Investors in KKR & CO Inc (Symbol: KKR) gained access to new options this week, set to expire on May 16th. Stock Options Channel utilized its YieldBoost formula to highlight one put and one call contract within the KKR options chain that may be particularly interesting.
Put Contract Insights
The put contract at the $115.00 strike price currently has a bid of $4.20. By selling-to-open this put contract, an investor commits to buy the stock at $115.00 and collects the premium. This action effectively lowers the cost basis of the shares to $110.80 before broker commissions. For investors contemplating a purchase of KKR shares, this represents a potentially appealing alternative to paying the current price of $121.37 per share.
The $115.00 strike price signifies roughly a 5% discount from the current trading price, meaning this option is out-of-the-money by that percentage. Current analytical data, including greeks and implied greeks, indicate there is a 67% chance the put contract may expire worthless. Stock Options Channel will monitor these odds over time, providing updates on our website under the contract detail page for this option. If the put expires worthless, the premium could yield a 3.65% return on the cash commitment, which annualizes to 25.64%. This metric is referred to as the YieldBoost.
Call Contract Opportunities
Switching to the call side, the call contract at the $125.00 strike price has a bid of $4.00. An investor who buys KKR shares at the current price of $121.37 and sells-to-open this call contract as a “covered call” agrees to sell the stock at $125.00. Including the premium collected, this strategy would produce a total return of 6.29% if the stock is called away at the May 16th expiration (not considering dividends or broker commissions). However, significant upside might be lost if KKR’s shares rise sharply, emphasizing the importance of reviewing KKR’s past trading history and business fundamentals.
A chart detailing KKR’s trading history with the $125.00 strike highlighted in red is provided below:
The $125.00 strike price equates to about a 3% premium over the current trading price, placing it out-of-the-money by the same percentage. Correspondingly, the chance is also present that this covered call contract may expire worthless, allowing the investor to retain both the stock and the collected premium. Current analytical data suggest there is a 54% probability of this outcome. Stock Options Channel will continue to document these odds over time and publish updates, charting both the trading history of this option as well. If the covered call expires worthless, the premium would represent an additional 3.30% return for the investor, or 23.13% annualized, again classified as the YieldBoost.
Volatility Insights
The implied volatility for both the put and call contracts is approximately 40%. In contrast, we calculate the trailing twelve-month volatility—based on the last 250 trading day closing values alongside today’s price of $121.37—to be 37%. For further ideas regarding put and call options contracts, visit StockOptionsChannel.com.
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The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.
