February 2014 Options Now Available For Marsh & McLennan Companies (MMC)

Dec 23 2013, 1:42pm CST | by

February 2014 Options Now Available For Marsh & McLennan Companies (MMC)
Photo Credit: Forbes Business

Investors in Marsh & McLennan Companies Inc. (NYSE: MMC) saw new options become available today, for the February 2014 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the MMC options chain for the new February 2014 contracts and identified one put and one call contract of particular interest.

The put contract at the $47.00 strike price has a current bid of 75 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $47.00, but will also collect the premium, putting the cost basis of the shares at $46.25 (before broker commissions). To an investor already interested in purchasing shares of MMC, that could represent an attractive alternative to paying $48.10/share today.

Because the $47.00 strike represents an approximate 2% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 63%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 1.60% return on the cash commitment, or 9.55% annualized — at Stock Options Channel we call this the YieldBoost.

Click here to find out the Top YieldBoost Puts of the S&P 500 »

Below is a chart showing the trailing twelve month trading history for Marsh & McLennan Companies Inc., and highlighting in green where the $47.00 strike is located relative to that history:

Turning to the calls side of the option chain, the call contract at the $49.00 strike price has a current bid of 65 cents. If an investor was to purchase shares of MMC stock at the current price level of $48.10/share, and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $49.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 3.22% if the stock gets called away at the February 2014 expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if MMC shares really soar, which is why looking at the trailing twelve month trading history for Marsh & McLennan Companies Inc., as well as studying the business fundamentals becomes important. Below is a chart showing MMC’s trailing twelve month trading history, with the $49.00 strike highlighted in red:

Considering the fact that the $49.00 strike represents an approximate 2% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 62%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 1.35% boost of extra return to the investor, or 8.09% annualized, which we refer to as the YieldBoost.

Click here to find out the Top YieldBoost Calls of the S&P 500 »

The implied volatility in the put contract example is 17%, while the implied volatility in the call contract example is 16%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $48.10) to be 14%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Solaire Shines Light On Philippine Casino Ambitions
The Philippines hopes to be the next big thing in Asian gaming, and its biggest step toward that goal just completed its first year of operation. Solaire Resort and Casino opened in March last year (see page 77; payment...
 
 
Innovators In The UK: Male, Affluent And Long-Term Planners
For decades, innovation policy has been the domain of technocrats and of party–political consensus. Whilst in other fields – such as science – regular surveys help inform public debate and policy-making, there has been...
 
 
Want To Earn $5,000? Stop Working
If you work for Amazon, Jeff Bezos will pay you a bonus of up to $5,000.  Generous, right?  And what do you have to do to get the bonus? Quit your job. It may seem crazy, but it’s true – a recent article in Time notes...
 
 
Your Local Mall, Re-digitized
As part of the never-ending battle for the consumer dollar, General Growth Properties, which owns some 120 high-end malls through the U.S., has recruited RetailMeNot to its side. Under a new agreement the two announced...
 
 
 

Latest from the Network

Apple Now Recycling All Apple Gadgets At Retail Stores
Apple has big things in the works for Earth Day, including their most recent announcement that their retail stores will start recycling all of their gadgets. Apple is calling it “free, responsible recycling” that will...
Read more on Apple Balla
 
Solaire Shines Light On Philippine Casino Ambitions
The Philippines hopes to be the next big thing in Asian gaming, and its biggest step toward that goal just completed its first year of operation. Solaire Resort and Casino opened in March last year (see page 77; payment...
Read more on Business Balla
 
Jay Z and Beyonce buy London home?
Jay Z and Beyonce have bought a $9.3 million home in London. The superstar couple have reportedly splashed out on a luxury detached townhouse in west London, having looked for properties in the trendy Mayfair area and...
Read more on Celebrity Balla
 
Aaron Sorkin Gives More Details On Jobs Movie
The upcoming Steve Jobs movie based on the Walter Isaacson biography is still in the works, with Aaron Sorkin in charge of writing the script. Unfortunately, that is almost all that we currently know about the film.He...
Read more on Apple Balla
 
Innovators In The UK: Male, Affluent And Long-Term Planners
For decades, innovation policy has been the domain of technocrats and of party–political consensus. Whilst in other fields – such as science – regular surveys help inform public debate and policy-making, there has been...
Read more on Business Balla
 
Cameron Diaz planning holiday for Gwyneth Paltrow
Cameron Diaz is organizing a girls' holiday to help Gwyneth Paltrow get over her marriage split. The 'Other Woman' actress is keen to cheer up her friend following the end of her 10-year marriage to Chris Martin and is...
Read more on Celebrity Balla
 
Want To Earn $5,000? Stop Working
If you work for Amazon, Jeff Bezos will pay you a bonus of up to $5,000.  Generous, right?  And what do you have to do to get the bonus? Quit your job. It may seem crazy, but it’s true – a recent article in Time notes...
Read more on Business Balla
 
Your Local Mall, Re-digitized
As part of the never-ending battle for the consumer dollar, General Growth Properties, which owns some 120 high-end malls through the U.S., has recruited RetailMeNot to its side. Under a new agreement the two announced...
Read more on Business Balla
 
Jon Hamm slams Justin Bieber
Jon Hamm has branded Justin Bieber a "sh**head." The 'Mad Men' star thinks the 20-year-old singer - who is facing charges for Driving Under the Influence (DUI), resisting arrest and possessing an invalid driver's...
Read more on Celebrity Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla