Unleashing the May 31st Options
Alibaba Group Holding Ltd (Symbol: BABA) investors witnessed the dawn of a new era as the May 31st options debuted in the market today. Stock Options Channel delved into the BABA options chain utilizing our YieldBoost formula to unearth one put and one call contract that stole the spotlight.
Analyze Before You Act
One intriguing put contract positioned at the $68.00 strike price, with a current bid of 54 cents, grabbed the attention of investors. Selling-to-open this put contract commits to acquiring the stock at $68.00, yet also grants the collection of a premium, which pares the cost basis down to $67.46 (pre-broker commissions). For those eying BABA shares, this presents an appealing alternative to the current $74.58/share price.
Exploring Potential Outcomes
Given that the $68.00 strike sits approximately 9% below the stock’s current trading price, rendering it out-of-the-money by that percentage, there’s a probability the put contract may expire worthless. Based on present analytical data, indicating a 78% chance of expiry without value, Stock Options Channel commits to monitoring these odds over time and sharing them via a detailed chart on our website.
Tracing the Journey
Witness the year-long trading trek of Alibaba Group Holding Ltd and spot the $68.00 strike marked in green to visualize its placement against historical data, laying the groundwork for informed decisions.
Navigating the Options Landscape
Transitioning to the calls sphere, a call contract at the $80.00 strike boasts a $2.53 bid. Engaging in a “covered call” by purchasing BABA shares at $74.58 and selling-to-open the call at $80.00 offers a potential total return of 10.66% if the stock is called away by the May 31st expiration. However, vigilance is crucial as substantial upside could elude if BABA shares spike skyward.
Forecasting the Future
The $80.00 strike, approximately 7% above the current stock price, sits out-of-the-money by that margin, inviting the likelihood of the covered call expiring without value. Present analytics tipping the scales at a 62% chance of this outcome will be methodically watched by Stock Options Channel and visually depicted for investors to track evolving odds.
Embracing the YieldBoost
If the covered call contract lapses worthless, the premium secured would amplify returns by 3.39%, or 24.76% annually, enhancing investor earnings. Implied volatility stands at 40% for put and 42% for call contracts, while actual trailing twelve month volatility computes at 35%.
Explore more enticing put and call options contract concepts at StockOptionsChannel.com.