Today, investors were presented with an opportunity as options for MDU Resources Group Inc (Symbol: MDU) were made available for the October 18th expiration. For option buyers, time value is a key consideration. The 246-day runway until expiration could provide sellers of puts or calls with the potential to attain a higher premium than what would be available for nearer expiry contracts. Stock Options Channel’s YieldBoost formula sifted through the MDU options chain for the new October 18th contracts and singled out one put and one call contract worthy of interest.
Put Contracts: A Glimpse into the Opportunity
At the $17.50 strike price, the put contract is currently bid at 10 cents. Selling-to-open this put contract signifies a commitment to purchase the stock at $17.50, while also collecting the premium. This results in a cost basis of $17.40 per share before broker commissions. For an investor eyeing MDU shares, this could present an appealing alternative to the current $20.85/share price tag.
The $17.50 strike represents an approximate 16% discount to the stock’s current trading price, signifying that the put contract may expire worthless. Current analytical data, including greeks and implied greeks, suggest a 99% likelihood of this outcome. Stock Options Channel will monitor these odds over time, providing a chart of the numbers on the contract detail page. Should the contract expire worthless, the premium would yield a 0.57% return on the cash commitment or 0.85% annualized, known as the ‘YieldBoost’.
Charting the Course with MDU’s Trading History
Examining the trailing twelve-month trading history for MDU Resources Group Inc unveils the $17.50 strike in relation to that timeline. This historical context provides a vivid understanding of the option’s position.
Call Contracts: Unraveling the Potential
Acquiring shares of MDU stock at the current price level of $20.85/share, and subsequently selling-to-open the call contract at the $22.50 strike, could result in a total return (excluding dividends, if any) of 8.39% should the stock get called away at the October 18th expiration. However, leaving significant upside potential on the table if MDU shares surge underscores the importance of understanding MDU’s trailing twelve-month trading history and business fundamentals. The historical context is crucial in assessing the potential outcomes of this call contract.
The approximate 8% premium that the $22.50 strike carries in relation to the current trading price of the stock indicates the possibility of the covered call contract expiring worthless, leaving the investor with their shares of stock and the collected premium. Current analytical data suggests a 99% likelihood of this outcome. Stock Options Channel will track these odds over time and publish a chart of the numbers. Should the contract expire worthless, the premium would provide an additional 0.48% boost of return to the investor, or 0.71% annualized, referred to as the ‘YieldBoost’.
Volatility and Further Considerations
Calculating the actual trailing twelve-month volatility to be 20%, considering the last 251 trading day closing values alongside today’s price of $20.85, provides a context for evaluating potential put and call options contract ideas. For detailed insights into the high schooler, visit StockOptionsChannel.com.
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Also see:
- REKR Average Annual Return
- ITW RSI
- COP Historical Stock Prices
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
