Ford Options: New $10 Call Contract Offers Limited Risk
Investors in Ford Motor Co. (Symbol: F) gained access to new options today, with contracts expiring on May 23rd. At Stock Options Channel, our YieldBoost formula has reviewed the F options chain, focusing on a noteworthy call contract.
Key Details on the Call Contract
The call contract at the $10.00 strike price currently has a bid of 7 cents. If an investor buys shares of F at the current price of $9.85 per share, and then sells that call contract as a “covered call,” they would agree to sell the stock at $10.00. By collecting the premium, the potential total return (excluding dividends, if any) would amount to 2.23% if the stock is called away by the May 23rd expiration date, before accounting for broker commissions.
This setup does have risks; if F shares rise significantly, the investor might miss out on higher returns. Thus, it is beneficial to assess Ford’s trailing twelve-month trading history and fundamental business aspects. The chart below illustrates F’s trading performance over the past year, highlighting the $10.00 strike price in red:
Understanding the Strike Price and Its Implications
The $10.00 strike price reflects roughly a 2% premium over the current trading price, categorizing it as out-of-the-money by that percentage. Consequently, there is a possibility that the covered call contract could expire worthless, allowing the investor to retain both their shares and the premium collected. Current analytics indicate that the odds of this scenario occurring are 43%. On our website, we will track these probabilities over time and provide relevant charts detailing the trading history of this option contract.
If the covered call contract expires worthless, the premium would add a 0.71% extra return to the investor’s overall return, equating to an annualized rate of 5.19%, a metric we refer to as the YieldBoost.
Volatility Metrics to Consider
The implied volatility associated with the aforementioned call contract is recorded at 93%. In contrast, we calculate the actual trailing twelve-month volatility, based on the last 251 trading days and the current price of $9.85, to be 37%. For additional ideas on put and call options contracts worth exploring, please visit StockOptionsChannel.com.
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Also see:
- Top Cheap Stocks
- Institutional Holders of BNS
- CARB Options Chain
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
