New NetApp Options Present Investment Opportunities for Traders

Investors in NetApp, Inc. (Symbol: NTAP) encountered new options today with a July 18th expiration date. A significant factor influencing the price an option buyer is willing to pay is the time value. With 94 days until expiration, the newly available contracts could offer sellers of puts or calls the chance to achieve higher premiums compared to contracts with closer expiration dates. Stock Options Channel utilized its YieldBoost formula to analyze the NTAP options chain and identified one put and one call contract of considerable interest.

Attractive Put Option Opportunity

The put contract at the $80.00 strike price currently has a bid of $5.00. If an investor chooses to sell-to-open this put contract, they agree to buy the Stock at $80.00, while also collecting the premium. This reduces the cost basis of the shares to $75.00, excluding broker commissions. For an investor already inclined to purchase NTAP shares, this strategy provides an appealing alternative to paying the current price of $83.61 per share.

Notably, the $80.00 strike is approximately a 4% discount from the current trading price, indicating it is out-of-the-money by that percentage. Analytical data suggests a 63% probability that the put contract may expire worthless. Stock Options Channel will monitor these odds and publish updates on their website under the contract detail page. If the contract does expire worthless, the premium collected represents a 6.25% return on the cash commitment, or 24.27% annualized—referred to as the YieldBoost.

Below is a chart showcasing the trailing twelve-month trading history for NetApp, Inc., highlighting the $80.00 strike location relative to that history:

Covered Call Option Consideration

Shifting our focus to the call side of the options chain, the call contract at the $85.00 strike price carries a current bid of $7.00. If an investor buys shares of NTAP at the prevailing price of $83.61 and then sells-to-open that call contract as a covered call, they agree to sell the Stock at $85.00. By collecting the premium, the total return (excluding potential dividends) would amount to 10.03% if the Stock is called away at the July 18th expiration (before broker commissions). However, significant upside could be left unrealized if NTAP shares see substantial increases, hence the importance of review concerning trailing trading history and business fundamentals.

Here’s a chart illustrating NTAP’s trailing twelve-month trading history, with the $85.00 strike indicated in red:

The $85.00 strike price stands as an approximate 2% premium to the current trading price, making it out-of-the-money by that percentage. Consequently, there exists a chance that the covered call contract may expire worthless, allowing investors to retain both their shares and the collected premium. Current analytical data estimates a 47% likelihood of this occurring. Stock Options Channel will also track these odds and display a chart of these statistics on their website. Should the covered call expire worthless, the premium would translate to an 8.37% additional return for the investor, or 32.51% annualized, also known as the YieldBoost.

Implied volatility for the put contract stands at 50%, while that for the call contract is at 48%. In comparison, the actual trailing twelve-month volatility, derived from the last 251 trading days and today’s price of $83.61, is calculated to be 38%. For additional insights into viable put and call options, explore StockOptionsChannel.com.

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Also see:

• Precious Metals Dividend Stocks
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.