Today, a new set of options for December 20th expiration began trading for investors in Ford Motor Co. (Symbol: F). With 343 days until expiration, these new contracts offer potential opportunities for sellers of puts or calls to achieve a higher premium than would be available for contracts with a closer expiration date. This is an interesting development for investors looking to capitalize on the time value of these options.
One intriguing observation is the put contract at the $10.00 strike price, which currently has a bid of 75 cents. Selling-to-open this put contract would commit the investor to purchase the stock at $10.00, while also collecting the premium, effectively putting the cost basis of the shares at $9.25 (before broker commissions). For investors eyeing F shares, this could present an appealing alternative to the current trading price.
Furthermore, considering that the $10.00 strike represents an approximate 14% discount to the current trading price of the stock, there is also the possibility that the put contract would expire worthless. The current analytical data suggests the odds of that happening are 99%. Stock Options Channel will monitor these odds over time to provide a comprehensive view. If the contract were to expire worthless, the premium would represent a 7.50% return on the cash commitment, or 7.98% annualized, which we refer to as the YieldBoost.
On the calls side of the option chain, the call contract at the $12.00 strike price has a current bid of $1.15. Selling-to-open this call contract as a “covered call” would commit the investor to sell the stock at $12.00, potentially driving a total return of 13.46% if the stock gets called away at the December 20th expiration (before broker commissions). However, thoughtful consideration of the trailing twelve-month trading history for Ford Motor Co. becomes important in this context.
With the $12.00 strike representing an approximate 4% premium to the current trading price of the stock, there is also the possibility that the covered call contract would expire worthless, with the current odds of that happening estimated at 99%. This would result in a boost of extra return to the investor, representing 9.92% or 10.56% annualized, which we refer to as the YieldBoost.
Considering the current trailing twelve-month volatility, estimated at 35%, investors are encouraged to explore more put and call options contract ideas at StockOptionsChannel.com.