IInvestors in Ferroglobe PLC (ticker: GSM) saw new options become available this week, for the January 2024 expiration. One of the main data going into the price that an option buyer is willing to pay is the time value. So, with 857 days to expiration, the new contracts available represent a possible opportunity for put or call options sellers to earn a higher premium than they would. be available for short-term contracts. TO Stock option channel, our YieldBoost formula has gone through the chain of GSM options for the new contracts of January 2024 and identified a sale contract and a purchase contract of particular interest.
The contract to sell at the strike price of $ 5.00 has a current bid of 30 cents. If an investor were to sell to open this sales contract, they agree to buy the stock at $ 5.00, but will also receive the premium, bringing the base price of the shares to $ 4.70 (before commissions broker). For an investor already interested in buying GSM shares, this could represent an attractive alternative to paying $ 9.29 / share today.
Since the strike price of $ 5.00 represents a discount of around 46% from the current share price (in other words, it’s out of the money by that percentage), it is also possible that the sales contract expires worthless. Current analytical data (including Greeks and Greeks implied) suggests that the current chance of this happening is 89%. Stock Options Channel will monitor these quotes over time to see how they evolve, posting a chart of these numbers on our website under contract detail page for this contract. If the contract expires worthless, the premium would represent a return of 6.00% on the cash commitment, or 2.56% annualized – at Stock Options Channel, we call that the YieldBoost.
Below is a chart showing Ferroglobe PLC’s last twelve months trading history and highlighting in green the location of the $ 5.00 exercise against that history:
Turning to the calls side of the options chain, the $ 15.00 strike price contract has a current bid of $ 1.00. If an investor were to buy GSM shares at the current price level of $ 9.29 / share and then sell to open that purchase contract as a ‘covered call’, they agree to sell the share at 15, $ 00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if any) of 72.23% if the stock was recalled at the January 2024 expiration (before broker commissions) . Of course, a lot of benefits could be left on the table if GSM stocks really do soar, which is why it becomes important to look at the last twelve months of Ferroglobe PLC trading, as well as study the fundamentals of the company. Below is a chart showing the GSM transaction history over the past twelve months, with the $ 15.00 strike highlighted in red:
Since the strike price of $ 15.00 represents a premium of around 61% over the current share price (in other words, it is out of the money by that percentage), it is It is also possible that the covered purchase contract will expire worthless, in which case the investor would keep both his shares and the premium received. Current analytical data (including Greeks and Greeks implied) suggests the current chance of this happening is 29%. On our website under contract detail page for this contract, Stock Options Channel will track these quotes over time to see how they change and publish a chart of these numbers (the option contract’s trading history will also be plotted). If the covered purchase contract expires worthless, the premium would represent a 10.76% increase in the additional return to the investor, or 4.58% annualized, which we call the YieldBoost.
The implied volatility in the sales contract example is 192%, while the implied volatility in the sales contract example is 125%.
Meanwhile, we calculate the actual volatility of the past twelve months (taking into account the closing values of the last 252 trading days as well as today’s price of $ 9.29) to be 107%. For more put and call option contract ideas worth considering, visit StockOptionsChannel.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.