Investors in the Royal Bank of Canada (RBC) began trading new options for the September 18th expiration today, October 17, 2023. Notably, a put contract at the $200 strike price has a current bid of $3.00, allowing investors to potentially purchase the stock at a net price of $197 per share, reflecting a 2% discount from the current trading price of $205.10. The odds of this put contract expiring worthless are estimated at 65%, which would yield a 1.50% return on the cash commitment, or an annualized 7.40%.
On the calls side, a $210 strike price call contract is currently bid at $3.90. If investors buy shares at $205.10 and sell this call as a covered call, they face potential total returns of 4.29% at expiration, excluding dividends. This call contract has a 56% chance of expiring worthless, which would allow investors to keep their shares and the premium, translating to a 1.90% increase in returns, or 9.38% annualized.
The implied volatility for the put contract is 22%, while for the call contract, it stands at 20%. Actual trailing twelve-month volatility is calculated at 15%.
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