New Trading Opportunities Emerge for SPDR S&P Regional Banking ETF Options
Options Trading Kicks Off for Expiring Contracts
Investors in SPDR Series Trust – SPDR S&P Regional Banking ETF (Symbol: KRE) welcomed the start of new options trading today for contracts set to expire on August 15th. With 217 days left until expiration, these fresh contracts offer put and call sellers a chance to earn higher premiums compared to shorter-term options. At Stock Options Channel, our YieldBoost formula has assessed the KRE options chain and pinpointed one attractive put and one call contract.
The highlighted put contract at the $56.00 strike price currently has a bid of $3.70. Selling this put means an investor agrees to buy KRE shares at $56.00 but will also receive the premium, reducing the effective cost basis to $52.30, before any broker fees. For those already considering investing in KRE, this could be a compelling alternative to buying shares outright at the current price of $58.28 each.
Since the $56.00 strike price is about a 4% discount to the current stock price, there is a chance that the put contract might expire worthless. Current data suggests a 63% likelihood of this happening. Stock Options Channel will monitor these odds, providing updated information on our website. If the contract expires without value, the premium would yield a 6.61% return on the cash required for purchase, equating to an 11.12% annualized return — a figure we refer to as the YieldBoost.
Call Options Point to Additional Profit Possibilities
On the call side of the options chain, a contract at the $61.00 strike price shows a current bid of $4.25. Should an investor buy KRE shares at $58.28 and simultaneously sell this call option as a “covered call,” they would agree to sell at $61.00. This move could lead to a total return of 11.96% if the stock is called away at expiration, excluding any dividends and broker costs. However, investors should be cautious, as potential gains could be limited if KRE shares experience a significant increase. Therefore, examining the trailing twelve-month trading history and financial fundamentals is crucial for informed decision-making.
Below is a chart depicting KRE’s trailing twelve-month trading history, with the $61.00 strike marked in red:
As the $61.00 strike price is approximately 5% above the current stock price, there is also a chance that the covered call could expire worthless, allowing the investor to keep both their shares and the premium earned. The current data indicate a 52% probability of this occurring. Stock Options Channel will track these changing odds over time, providing insights and updated charts on our website. If the covered call expires without value, the collected premium would represent a 7.29% extra return, or an annualized 12.27% yield, also referred to as the YieldBoost.
The implied volatility for the put option is noted at 29%, while the call option stands at 30%. Meanwhile, we calculate the actual trailing twelve-month volatility to be 29%, assessing the last 250 trading days in conjunction with today’s price of $58.28. To discover more options strategies, visit StockOptionsChannel.com.
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Additional Resources:
- Top Ten Hedge Funds Holding ACPW
- CURV YTD Return
- AMF Historical Stock Prices
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
