IInvestors in Annaly Capital Management Inc (ticker: NLY) saw new options become available today, with the December 3 expiration. TO Stock option channel, our YieldBoost formula went through the NLY options chain for new December 3 contracts and identified a sale contract and a purchase contract of particular interest.
The contract to sell at the strike price of $ 8.50 has a current bid of 10 cents. If an investor were to sell to open this sales contract, they agree to buy the stock at $ 8.50, but will also collect the premium, putting the base price of the stock at $ 8.40 (before broker commissions ). For an investor already interested in purchasing NLY shares, this could represent an attractive alternative to paying $ 8.72 / share today.
Since the strike price of $ 8.50 represents a discount of around 3% 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 100%. 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 1.18% on the cash commitment, or 9.98% annualized – at Stock Options Channel, we call that the YieldBoost.
Below is a chart showing the past twelve months trading history of Annaly Capital Management Inc, and highlighting in green the location of the $ 8.50 exercise against that history:
As for the options chain call options, the $ 9.00 strike price call contract has a current bid of 9 cents. If an investor were to buy shares of NLY at the current price level of $ 8.72 / share and then sell to open that purchase contract as a âcovered callâ, they agree to sell the share at 9. , $ 00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if any) of 4.24% if the stock were recalled at the December 3 expiration (before broker commissions. ). Of course, a lot of benefits could be left on the table if NLY shares really soar, which is why it becomes important to look at the past twelve month trading history of Annaly Capital Management Inc, as well as to study the fundamentals of the business. Below is a chart showing NLY’s last twelve months trading history, with the $ 9.00 strike highlighted in red:
Since the strike price of $ 9.00 represents a premium of around 3% 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 that the current chance of this happening is 99%. 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 an increase of 1.03% in the additional return to the investor, or 8.75% annualized, which we call the YieldBoost.
Meanwhile, we calculate the actual volatility of the past twelve months (taking into account the closing values ââof the last 252 trading days as well as today’s price of $ 8.72) at 20%. 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.