Investors in Caesars Entertainment Inc (symbol: CZR) noticed new options available this week for an expiration date of March 2024. One of the key data points that determines the price an option buyer is willing to pay is time value. Therefore, with 161 days until expiration, the newly available contract could be an opportunity for put or call sellers to achieve a higher premium than previously. You can also use it even if your contract is nearing its expiration date.in stock options channelour Yield Boost formula examined the CZR options chain for March 2024 new contracts and identified one put and call contract of particular interest.
The current bid for a put contract with a strike price of $42.00 is $4.25. If the investor sells that put contract openly, they commit to buying the stock for his $42.00, but they also collect a premium, making the stock’s cost basis (before broker commissions) $37.75. For investors already interested in purchasing CZR stock, this could be an attractive alternative to paying $43.57 per share today.
Because the $42.00 strike price represents approximately a 4% discount to the stock’s current trading price (i.e., it is out of the money by that percentage), it is also possible that the put contract will expire worthless. According to the current analytical data (including Greek and implied Greek), the probability is 63%. Stock Options Channel tracks how these odds change over time and publishes graphs of those numbers on our website. Contract details page for this contract. If the contract were to expire worthless, the premium would represent a 10.12% return on the cash commitment, or an annualized return of 22.94%. The stock options channel calls this “ yield boost.
Below is a chart showing Caesars Entertainment Inc’s trading history over the past 12 months, highlighting in green where the $42.00 strike is located relative to that history.
Turning to the call side of the option chain, the current bid for a call contract with a strike price of $46.00 is $4.85. If an investor buys his CZR stock at the current price level, which is his $43.57 per share, and offers the call contract openly as a “covered call,” the investor sells the stock at his $43.57 per share. You are committed to selling it for $46.00. Considering that the seller of the call also collects a premium, his total return (excluding dividends, if any) if the stock goes call away on his March 2024 expiration (before broker fees) is 16.71 %. Of course, there could be a lot of upside potential if CZR stock really soars. That’s why it’s important to examine Caesars Entertainment’s trading history over the past 12 months and study its business fundamentals. Below is a chart showing the past 12 months of CZR’s trading history, with the $46.00 strike highlighted in red.
Given the fact that the $46.00 strike price represents a premium of approximately 6% over the current trading price of the stock (in other words, it is out of the money by that percentage), the covered call contract is invalid. There is a possibility that it will become. If it expires worthless, the investor will retain both the stock and the premium collected. According to current analytical data (including Greek and implied Greek), the probability of such happening is currently 47%. On our website, Contract details page for this contract, the Stock Options Channel tracks these odds over time to see how they change and publishes charts of those numbers (the trading history of option contracts is also charted). If the covered call contract expires worthless, the premium represents his 11.13% increase in additional return to the investor, or his 25.24% increase on an annualized basis. yield boost.
The put contract example has an implied volatility of 50%, while the call contract example has an implied volatility of 48%.
On the other hand, the actual volatility over the past 12 months (considering the last 251 business days’ closing price and today’s price of $43.57) is calculated to be 48%. Visit StockOptionsChannel.com for ideas on noteworthy put and call option contracts.
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See also:
• Institutional holders of FTII
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
