Unveiling New Opportunities
Investors who track Netflix Inc (NFLX) witnessed the emergence of fresh options this week, aligning with the upcoming May 31st expiration. Utilizing the savvy YieldBoost formula, opportunities within the NFLX options chain were unearthed, focusing on one put and one call contract that stand out from the rest.
The put contract at the $625.00 strike price immediately catches the eye with a bid of $33.75. By opting to sell-to-open this put contract, an investor commits to acquiring the stock at $625.00, all while pocketing the premium. In essence, this move pegs the cost basis of the shares at $591.25 (prior to broker commissions). For investors eyeing NFLX shares, this represents a compelling alternative to the current market price of $628.27 per share.
Examining Probabilities and Returns
The $625.00 strike denotes a roughly 1% markdown from the current stock price, positioning it as out-of-the-money by that percentage. Consequently, there exists a 56% chance, as per current analytical data, that the put contract might expire worthless. Tracking these odds over time will provide valuable insights, with Stock Options Channel committed to furnishing this data promptly. Should the contract indeed expire worthless, the premium equates to a 5.40% return on the cash outlay, or an annualized rate of 40.22%, a metric aptly dubbed the YieldBoost.
Shifting focus to the calls segment of the option chain, the call contract at the $635.00 strike shines light with a bid of $35.40. By purchasing NFLX shares at the current $628.27/share level and subsequently selling-to-open this call contract as a “covered call,” investors commit to vend the stock at $635.00. This strategic play not only allows the call seller to secure the premium but could yield a total return of 6.71% if the stock gets called away at the May 31st expiration (sans dividends), offering a clever move amidst potential market fluctuations. Meticulously analyzing NFLX’s trading history over the past year is vital to understanding the underlying business dynamics. A chart below portrays the trailing twelve month trading history for NFLX, with the highlighted $635.00 strike displayed prominently in red:
Forecasting Scenarios and Additional Insights
Contemplating the fact that the $635.00 strike denotes around a 1% premium to the current stock price, categorizing it as out-of-the-money by that magnitude, there exists a 48% probability, based on present analytical metrics, that the covered call contract may expire futile. Stock Options Channel vows to monitor these probabilities diligently, updating data and charts timeously for investors to stay informed. In the event of the covered call contract fizzling out, the premium offers a 5.63% supplementary return to the investor, translating to an annualized boost of 41.97%, termed the YieldBoost.
An appraisal of implied volatilities reveals 42% for the put contract and 41% for the call contract, adding depth to the options landscape. Meanwhile, the actual trailing twelve month volatility stands at 34%, considering the previous 251 trading day closures alongside the present $628.27 price point. For a plethora of put and call options contract ideas worth exploring, a visit to StockOptionsChannel.com remains a prudent choice.
Top YieldBoost Calls of the Nasdaq 100 »