New Options for Vanguard FTSE Developed Markets Fund Investors
Investors in Vanguard Tax-Managed Funds – Vanguard FTSE Developed Markets Exchange Traded Fund (Symbol: VEA) received fresh options this week set to expire on May 16th. Utilizing our YieldBoost formula at Stock Options Channel, we have identified one notable put and call contract from the new May 16th options chain.
Options Overview: Put Contract Analysis
The highlighted put contract at the $51.00 strike price currently bids at 45 cents. If an investor sells-to-open this put contract, they agree to purchase VEA shares at $51.00. By doing so, they also collect the premium, lowering their effective cost basis to $50.55 (prior to any broker commissions). For those already considering buying VEA, this could serve as an appealing alternative to buying the shares outright at the current price of $52.09 per share.
This $51.00 strike price offers around a 2% discount compared to today’s trading price, indicating that the put is out-of-the-money by that percentage. Current analysis estimates a 70% chance that this put contract could expire worthless. Our Stock Options Channel will monitor these odds over time and publish updates to our website. If the contract expires worthless, the premium represents a potential 0.88% return on the cash commitment, or an annualized return of 6.31%, which we term the YieldBoost.
Visual Representation of Trading History
Below is a chart displaying the trailing twelve-month trading history for the Vanguard FTSE Developed Markets Fund, marked in green to show where the $51.00 strike is located relative to this history:
Options Overview: Call Contract Analysis
Shifting to the call side of the options chain, the $53.00 strike call contract currently bids at 75 cents. If an investor buys VEA shares at the current price of $52.09 and then sells-to-open this call contract as a “covered call,” they agree to sell their shares at $53.00. Including the premium collected, this could yield a total return of 3.19% if the stock is called away by the May 16th expiration (again, prior to broker commissions). However, significant upward movement in VEA shares could limit the upside potential, making analysis of both the trading history and underlying fundamentals crucial.
Below is the chart showing VEA’s trading history, with the $53.00 strike highlighted in red:
The $53.00 strike price stands as approximately a 2% premium to the current share price, rendering it out-of-the-money by that percentage. There is potential for the covered call contract to also expire worthless, allowing the investor to retain both their shares and the premium. Current analytical data suggests there’s a 56% chance of this outcome. Stock Options Channel will continue to track these metrics on our website. Should the covered call expire worthless, the premium would provide an additional return of 1.44%, equating to an annualized yield boost of 10.30%, also known as the YieldBoost.
Implied and Trailing Volatility Analysis
The implied volatility for the put contract is 15%, while for the call contract, it is 14%. In contrast, our calculation of the actual trailing twelve-month volatility (based on the last 250 trading days and today’s price of $52.09) stands at 14%. For more ideas on put and call options contracts worth considering, visit StockOptionsChannel.com.
Top YieldBoost Calls of the S&P 500 »
also see:
- REITs Dividend Stocks
- Institutional Holders of AFM
- ARE Price Target
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
