Investors in BHP Billiton plc (Symbol: BBL) saw new options
begin trading this week, for the October 18th expiration. At
, our YieldBoost formula has looked up and down the BBL options
chain for the new October 18th contracts and identified the
following put contract of particular interest.
The put contract at the $60.00 strike price has a current bid of 20
cents. If an investor was to sell-to-open that put contract, they
are committing to purchase the stock at $60.00, but will also
collect the premium, putting the cost basis of the shares at $59.80
(before broker commissions). To an investor already interested in
purchasing shares of BBL, that could represent an attractive
alternative to paying $63.01/share today.
Because the $60.00 strike represents an approximate 5% discount
to the current trading price of the stock (in other words it is
out-of-the-money by that percentage), there is also the possibility
that the put contract would expire worthless. The current
analytical data (including greeks and implied greeks) suggest the
current odds of that happening are 67%. Stock Options Channel will
track those odds over time to see how they change, publishing a
chart of those numbers on our website under the
contract detail page for this contract
. Should the contract expire worthless, the premium would represent
a 0.33% return on the cash commitment, or 2.43% annualized - at
Stock Options Channel we call this the
Below is a chart showing the trailing twelve month trading history
for BHP Billiton plc, and highlighting in green where the $60.00
strike is located relative to that history:
The implied volatility in the put contract example above is 32%.
Meanwhile, we calculate the actual trailing twelve month volatility
(considering the last 253 trading day closing values as well as
today's price of $63.01) to be 22%. For more put and call options
contract ideas worth looking at, visit StockOptionsChannel.com.
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