Investors in Mastercard Inc (Symbol: MA) have made new options available today, due to expire on May 22nd. At Stock Options Channel, our YieldBoost formula searched up and down the MA option chain for new contracts on May 22nd and identified a put and call call of particular interest.
The put contract at the strike price of $ 230.00 has a current bid of $ 14.00. If an investor had to sell to open that put contract, they pledge to buy the stock for $ 230.00, but they also collect the premium, placing the cost base of the shares at $ 216.00 (before the broker commissions). For an investor already interested in purchasing MA shares, this could be an attractive alternative to paying $ 235.32 / share today.
Since the $ 230.00 strike represents an approximate 2% discount on the current trading price of the stock (in other words, it is out of that percentage), there is also the possibility that the put contract will expire worthless. Current analytical data (including implied Greeks and Greeks) suggest that the current odds of this happening are 100%. Stock Options Channel will follow these quotas over time to see how they change, by posting a graph of those numbers on our website on the contract details page for this contract. If the contract expires worthless, the premium would represent a yield of 6.09% on the cash commitment, or 44.43% on an annual basis – in the Stock Options Channel we call it YieldBoost.
Below is a chart showing the 12-month trading history expiring for Mastercard Inc and showing in green where the $ 230.00 strike relating to that history is located:
As for the call side of the option chain, the call contract at the strike price of $ 237.50 has a current bid of $ 14.60. If an investor had to buy MA stock at the current price level of $ 235.32 / share, and then sell-to-open that call contract as a “covered call”, they are committed to selling the stock for $ 237.50. . Considering that the calling seller will also collect the premium, which would result in a total return (excluding any dividends) of 7.13% if the stock is called upon the expiry of May 22 (before the broker commissions). Obviously, a lot of the upside could potentially be left on the table if the MA stocks really did go up, which is why looking at the history of the past twelve months of trading for Mastercard Inc, as well as studying the fundamentals of business becomes important. Below is a chart showing MA’s twelve-month trading history, with the $ 237.50 strike highlighted in red:
Considering the fact that the strike of $ 237.50 represents an approximate premium of 1% at the current trading price of the security (in other words it is out of the market by this percentage), there is also the possibility that the covered call contract will expire worthless, in which case the investor will retain both their shares and the premium collected. Current analytical data (including implied Greeks and Greeks) suggest that the current odds of this happening are 50%. On our website on the contract detail page for this contract, the Stock Options Channel will follow the odds over time to see how they change and publish a graph of those numbers (the trading history of the option contract will also be tracked). If the hedged call contract expires worthless, the premium would represent an increase of 6.20% in the additional return for the investor, or 45.29% annualized, which we call YieldBoost.
The volatility implied in the example of the call contract above is 58%.
In the meantime, we calculate the actual twelve-month final volatility (considering the last 252 closing values on the trading day and today’s price of $ 235.32) equal to 41%. For more ideas on put and call contracts to visit, visit StockOptionsChannel.com.
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