February 2022 RMD options start trading
IInvestors in ResMed Inc. (ticker: RMD) saw new options start trading today, with the February 2022 expiration. Stock option channel, our YieldBoost formula walked through the RMD options chain for new February 2022 contracts and identified a sale contract and a purchase contract of particular interest.
The contract to sell at the strike price of $ 250.00 has a current bid of $ 9.60. If an investor were to sell to open this sales contract, they agree to buy the stock at $ 250.00, but will also receive the premium, bringing the base price of the shares to $ 240.40 (before commissions broker). For an investor already interested in purchasing RMD shares, this could represent an attractive alternative to paying $ 253.53 / share today.
Since the strike price of $ 250.00 represents a discount of around 1% from the current share price (in other words, it is 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 99%. 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 3.84% return on the cash commitment, or 21.90% annualized – at Stock Options Channel, we call that the YieldBoost.
Below is a chart showing ResMed Inc.’s past twelve month trading history and highlighting in green the location of the $ 250.00 exercise against that history:
Turning to the calls side of the options chain, the contract to buy at the strike price of $ 260.00 has a current bid of $ 9.00. If an investor were to buy RMD shares at the current price level of $ 253.53 / share and then sell to open that purchase contract as a ‘covered call’, they agree to sell the share at 260, $ 00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if any) of 6.10% if the stock was recalled at the February 2022 expiration (before broker commissions. ). Of course, a lot of benefits could be left on the table if RMD shares really soar, which is why it becomes important to look at the past twelve month trading history of ResMed Inc., as well as of ResMed Inc. study the fundamentals of the business. Below is a chart showing RMD’s past twelve months trading history, with the strike price of $ 260.00 highlighted in red:
Considering that the strike price of $ 260.00 represents a premium of around 3% 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 58%. 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 3.55% increase in the additional return to the investor, or 20.25% annualized, which we call the YieldBoost.
The implied volatility in the purchase contract example above is 32%.
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 $ 253.53) at 25%. 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.