Home Market News Trading Strategies Unveiled: Analyzing Options for Align Technology (ALGN)

Trading Strategies Unveiled: Analyzing Options for Align Technology (ALGN)

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Trading Strategies Unveiled: Analyzing Options for Align Technology (ALGN)

Diving into the May 3rd Options Landscape for ALGN

Investors in Align Technology Inc observed the initiation of options trading on May 3rd, urging a meticulous examination of the available put and call contracts. Stock Options Channel’s diligent YieldBoost formula scrutinized the ALGN options chain for the latest May 3rd contracts, pinpointing one put and one call contract that piqued interest.

Potential Bargains Unveiled

The put contract with a $325.00 strike price allures investors with a current bid of $17.90. For those opting to sell-to-open the put contract, they commit to purchasing the stock at $325.00 while reaping the premium, setting the cost basis of the shares at $307.10 (prior to broker commissions).

Choosing this option could provide an enticing alternative for investors eyeing ALGN shares, potentially saving them from the current $328.75/share price tag.

Analyzing Probabilities and Historical Context

Positioned at an approximate 1% discount compared to the current stock price, the $325.00 strike highlights an out-of-the-money scenario. The existing analytical data indicates a 58% chance of the put contract expiring worthless, promising an intriguing 5.51% return on the cash commitment.

Strategic Charting and Risk Assessment

In the image below, the chart exhibits the trailing twelve-month trading history for Align Technology Inc, showcasing the $325.00 strike’s location in relation to that historical data.

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Transitioning to the calls segment of the option chain, the call contract carrying a $335.00 strike price presents an exciting opportunity with a current bid of $20.00. Should an investor acquire ALGN shares at the prevailing $328.75/share price and then sell-to-open the call contract as a “covered call,” they commit to selling the stock at $335.00. This strategic move could yield a total return of 7.98% if the stock is called away during the May 3rd expiration, sans dividends.

Strategic Insights and Future Prospects

As depicted in the chart below, highlighting ALGN’s trailing twelve-month trading history with the $335.00 strike marked in red, investors must carefully weigh their options and consider business fundamentals when exploring covered calls.

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The $335.00 strike represents an approximate 2% premium over the current stock price, hinting at an out-of-the-money scenario with a 49% chance of the covered call expiring worthless. In such a case, the investor retains both their stock and the collected premium, offering a potential boost in return.

Volatility Insights and Additional Opportunities

The implied volatility stands at 50% for the put contract and 51% for the call contract. Contrarily, the actual trailing twelve-month volatility, considering the latest 251 trading day closing values along with the current price of $328.75, is calculated at 49%. For more options contract ideas, investors can explore 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.