New Options Surge for Vanguard Information Technology ETF: Explore the Benefits for Investors
Investors in the Vanguard Sector Index Funds Vanguard Information Technology ETF (Symbol: VGT) have new options available today, expiring in December 2025. With 354 days until expiration, these options may provide an interesting opportunity for option sellers to earn higher premiums compared to contracts with shorter expirations.
Understanding the Potential of Put Options
One highlighted opportunity is a put contract at the $620.00 strike price, now with a current bid of $43.10. Selling this put means the investor commits to purchase VGT stock at $620.00, while also collecting the premium. This effectively lowers the cost basis of the shares to $576.90, allowing investors to consider a more attractive price than the current market value of $623.95 per share.
The $620.00 strike price presents an approximate 1% discount to VGT’s current trading price, making it slightly out-of-the-money. Options analysis suggests a 62% probability that the put contract may expire worthless. If that occurs, the premium collected represents a 6.95% return on the cash investment, or 7.17% when annualized. We refer to this as the YieldBoost.
Below, you can see a chart showing the past twelve months of trading for the Vanguard Information Technology ETF, with the $620.00 strike price indicated:
Exploring Call Options and Potential Returns
On the calls side, there is a contract at the $660.00 strike price, currently offered at a bid of $47.50. If an investor buys shares of VGT at the current price of $623.95/share and sells this call as a covered call, they would agree to sell the stock at $660.00. Adding the premium to the sale price results in a total return of 13.39% if executed at expiration, excluding dividends and fees.
However, if VGT’s price exceeds $660.00 significantly, the investor might miss out on potential gains. This makes it crucial to analyze past trading data and the company’s business fundamentals. Below is the chart illustrating VGT’s trading history with the $660.00 strike highlighted:
The $660.00 strike represents roughly a 6% premium over the current share price, suggesting a chance that this covered call could also expire worthless, enabling the investor to keep both their shares and the premium. Current data indicates a 49% probability of this happening. If so, the premium would translate to a 7.61% boost in total returns, equating to 7.85% annualized, also classified as the YieldBoost.
Implied volatility for the put contract example is recorded at 24%, while the call contract stands at 23%. Notably, the actual trailing twelve-month volatility—factoring in the last 250 trading day closing values and today’s price—is at 21%. For other insightful options contract strategies, visit StockOptionsChannel.com.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
