Investors in Meta Platforms Inc (Symbol: META) have noticed new options becoming available today that expire on November 4th. U Stock options channelour YieldBoost formula looked at the META options chain for new contracts from November 4th and identified one put contract and one call contract of particular interest.
A put contract with a strike price of $130.00 has a current bid of $6.10. If the investor were to sell to open this put contract, they would commit to buying the stock at $130.00, but would also collect a premium given the stock’s basis of $123.90 (before brokerage fees). For an investor already interested in META stock, this could be an attractive alternative to today’s $141.37 per share payment.
Since the $130.00 strike represents an approximate 8% discount to the stock’s current trading price (in other words, they are out of money for that percentage), there is also the possibility that the put contract will expire worthless. Current analytics (including Greek and implied Greek) show that the current probability of this happening is 99%. Stock Options Channel will track these ratios over time to see how they change by posting a chart of these numbers on our website under contract details page. If the contract expires, the premium will be 4.69% return on the cash commitment, or 39.83% annualized—at Stock Options Channel we call it YieldBoost.
Below is a chart showing Meta Platforms Inc’s trailing twelve month trading history and showing the $130.00 strike location relative to that history in green:
Turning to the call side of the options chain, a call contract with a strike price of $155.00 has a going rate of $5.70. If an investor were to purchase META stock at the current price level of $141.37 per share, and then sell that call contract to open as a “covered call,” he commits to selling the stock at $155.00. Given the call, the seller will also receive a premium, resulting in a total return (excluding dividends, if any) of 13.67% if the shares are called at expiration on November 4 (before broker fees). Of course, there is potentially a lot of upside to be had if META stock does take off, so looking at Meta Platforms Inc’s trading history over the past twelve months as well as studying the business fundamentals becomes important. Below is a chart showing META’s trading history over the past twelve months, with the $155.00 strike highlighted in red:
Given the fact that the $155.00 strike represents an approximate 10% premium to the stock’s current trading price (in other words, they are out of the money by that percentage), there is also the possibility that the covered call contract will end up worthless , in which case the investor will keep both his shares and the collected premium. Current analytics (including Greek and implied Greek) show that the current probability of this happening is 99%. On our website under contract details page, the Stock Options Channel will track these ratios over time to see how they change and post a chart of these numbers (also showing the options contract’s trading history). If the call contract expires, the premium will represent an additional return to the investor of 4.03%, or 34.22% on an annualized basis, which we call YieldBoost.
Meanwhile, we calculate that the actual volatility for the last twelve months (taking into account the closing values of the last 252 trading days, as well as today’s price of $141.37) is 57%. For more put and call options contract ideas to watch, visit StockOptionsChannel.com.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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