Fresh Opportunities Unveiled
Welcome, savvy investors! Today rings in a new day of exciting possibilities for those holding Eaton Corp plc (Symbol: ETN) as options for the May 17th expiration hit the market shelves. With 84 days standing between now and the expiration date, these newly launched contracts may just be the golden ticket for put and call sellers seeking to snag a premium higher than what’s on hand for near-expiration contracts.
The Decisive Bid
Taking a closer look, the put contract at the $280.00 strike price is currently fetching a bid of $7.60. Should an investor choose to sell-to-open this contract, they are essentially agreeing to buy the stock at $280.00, while pocketing the premium. This would effectively peg the cost basis of the shares at $272.40 (sans the broker commissions). For those eyeing Eaton Corp shares, this could well be a tantalizing alternative to the current market price of $285.20 per share.
A Hedge Against Risk
Hovering at around a 2% discount to the prevailing stock price, the $280.00 strike offers a safety margin for investors. In clearer terms, the put contract stands as an out-of-the-money prospect by that percentage, hinting at the prospect of the contract expiring futile. Current analytical data, including greeks and implied greeks, project a 99% chance of this outcome. Stock Options Channel will diligently monitor these probabilities as time ticks by, presenting a graphical representation on our website. If the contract happens to plummet to zero value, investors can relish a 2.71% return on the cash investment, or a yearly boost of 11.80% what we fondly term as the YieldBoost.
Visualizing the Trajectory
Glancing over the trailing twelve-month stock history of Eaton Corp plc, a prominent illustration surfaces pinpointing the $280.00 strike in green against this backdrop, highlighting its position within the company’s financial narrative.
The Call to Action
On the flip side, the call contract punching in at the $300.00 strike holds a current bid of $6.50. For investors clinching shares of ETN at the current $285.20 per share rate, initiating a “covered call” would entail pledging to sell the stock at $300.00. Incorporating the premium, this garners a complete return (sans dividends) of 7.47% when the stock sails away at the May 17th expiration, before considering the broker commissions. Yet, untapped potential may loiter if ETN stocks make a soaring leap. This calls for a deep dive into Eaton Corp plc’s preceding year’s performance and business fortitude.
Vivid Red Flags
Showcasing an approximate 5% premium to the extant stock trading price, the $300.00 strike lingers as an out-of-the-money placement by that percentage. As such, the peril of the covered call contract dwindling to zero value isn’t far-fetched, with current analytics projecting a staggering 99% likelihood. Stoically, Stock Options Channel will monitor these odds periodically, sharing graphical insights on our website. If the covered call meets an unwelcome fate, the premium fetches a 2.28% kicker to the investor’s return, or a dazzling 9.91% yearly on an average, better known as the YieldBoost.
Fluctuating Volatility and the Way Forward
Casting an eye on the actual trailing twelve-month volatility calculated at 27%, founded on the closing values across the last 251 trading days alongside the current $285.20 price tag, offers food for thought. For a repertoire of put and call options contract insights worth exploring, do drop by StockOptionsChannel.com.
Also see:
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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.
