IInvestors in New Residential Investment Corp (ticker: NRZ) saw new options start trading this week, for the January 2024 expiration. One of the main data going into the price that an options buyer is willing to pay is time value. So, with 855 days left to expire, new trading contracts represent a potential opportunity for put or call options sellers to earn a higher premium than they would. be available for short-term contracts. At Stock Options Channel, our YieldBoost formula scoured the NRZ options chain for new January 2024 contracts and identified a put and call of particular interest.
The contract to sell at the strike price of $ 5.00 has a current bid of 25 cents. If an investor were to sell to open that 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 $ 4.75 (before commissions broker). For an investor already interested in purchasing NRZ shares, this could represent an attractive alternative to paying $ 10.98 / share today.
Since the strike price of $ 5.00 represents a discount of around 54% 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 the current chance of this happening is 93%. The Stock Options Channel will monitor these quotes over time to see how they evolve, posting a chart of these numbers on our website under the contract detail page for that contract. If the contract expires worthless, the premium would represent a return of 5.00% on the cash commitment, or 2.13% annualized – at Stock Options Channel, we call that the YieldBoost.
Below is a chart showing New Residential Investment Corp’s past twelve month trading history, and highlighting in green where the $ 5.00 strike price is relative to that history:
As for the option chain calls, the $ 12.00 strike purchase contract has a current bid of 71 cents. If an investor were to buy NRZ shares at the current price level of $ 10.98 / share and then sell to open that purchase contract as a âcovered callâ, they agree to sell the share at 12. , $ 00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if applicable) of 15.76% if the stock is recalled at the January 2024 expiration (before broker commissions) . Of course, a lot of benefits could be left on the table if NRZ shares really soar, which is why it becomes important to look at New Residential Investment Corp’s last twelve months trading history, as well as ” study the fundamentals of the business. Below is a chart showing NRZ’s trading history over the past twelve months, with the strike price of $ 12.00 highlighted in red:
Considering that the strike price of $ 12.00 represents a premium of around 9% over the current share price (in other words, it’s out of the money by that percentage), 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 60%. On our website, under the contract detail page for that contract, the Stock Options Channel will track these quotes over time to see how they change and publish a chart of those numbers (the option contract’s trading history will be also plotted). If the covered purchase contract expires worthless, the premium would represent an increase of 6.47% in the additional return to the investor, or 2.76% annualized, which we call the YieldBoost.
The implied volatility in the sales contract example is 103%, while the implied volatility in the sales contract example is 35%.
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 $ 10.98) at 35%. For more put and call option contract ideas worth considering, visit StockOptionsChannel.com.
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