New Options for GEO Group Inc: Insights and Strategies for Investors

On November 10, 2023, investors in GEO Group Inc (Symbol: GEO) were presented with new options set to expire in January 2025. Stock Options Channel examined the options chain and identified notable opportunities in both put and call contracts.

Exploring the Put Option

The put contract at a $27.00 strike price currently has a bid of 5 cents. If an investor sells-to-open this put contract, they commit to buying the stock at $27.00, while also collecting the premium. This would bring the shares’ effective cost to $26.95 (excluding broker fees). For those eyeing shares of GEO, this offer presents a compelling alternative to purchasing at $27.45 per share today.

Given that the $27.00 strike price is about a 2% discount to the current trading price, there’s a notable chance the put contract could expire worthless. Current analysis indicates a 59% probability of this outcome. Stock Options Channel monitors these odds regularly, providing updated data on their website. If the put expires worthless, the premium represents a 0.19% return on the cash commitment, or an annualized return of 1.35%, which is referred to as the YieldBoost.

Examining the Call Option

On the other side, the call contract at the $28.00 strike price has a current bid of 20 cents. Should an investor buy GEO stock at the current price of $27.45 and sell-to-open this call as a “covered call,” they would be setting a sell price of $28.00. This approach could yield a total return of 2.73% if the stock is called away by the January 2025 expiration (before accounting for broker fees). However, if GEO’s shares increase significantly, there may be untapped potential for further gains. Therefore, tracking GEO’s past twelve months of trading activity and understanding the company’s fundamentals is crucial.

The following chart illustrates GEO’s trading history and highlights where the $28.00 strike price falls:

The $28.00 strike offers a 2% premium over the current trading price, meaning the covered call could also expire worthless. If that occurs, the investor would retain both their shares and the premium earned. Current analysis suggests a 48% chance of this happening. Stock Options Channel will keep track of these odds and publish updates on their website. If the call expires without being exercised, the premium would give the investor a 0.73% additional return, which equates to an annualized 5.32% YieldBoost.

Volatility Insights

The put contract’s implied volatility stands at 59%, while the call contract’s is at 60%. We calculate that the actual trailing twelve-month volatility, based on the last 251 trading days, is 57%. For more options contract ideas worth considering, visit 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.