First Week of TTM February 22nd Options Trading

Jan 27 2014, 10:36am CST | by

First Week of TTM February 22nd Options Trading

Investors in Tata Motors Ltd (NYSE: TTM) saw new options become available this week, for the February 22nd expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the TTM options chain for the new February 22nd contracts and identified one put and one call contract of particular interest.

The put contract at the $27.00 strike price has a current bid of 95 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $27.00, but will also collect the premium, putting the cost basis of the shares at $26.05 (before broker commissions). To an investor already interested in purchasing shares of TTM, that could represent an attractive alternative to paying $27.38/share today.

Because the $27.00 strike represents an approximate 1% 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 57%. 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 3.52% return on the cash commitment, or 49.39% 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 Tata Motors Ltd, and highlighting in green where the $27.00 strike is located relative to that history:

Turning to the calls side of the option chain, the call contract at the $28.00 strike price has a current bid of 85 cents. If an investor was to purchase shares of TTM stock at the current price level of $27.38/share, and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $28.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 5.37% if the stock gets called away at the February 22nd expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if TTM shares really soar, which is why looking at the trailing twelve month trading history for Tata Motors Ltd, as well as studying the business fundamentals becomes important. Below is a chart showing TTM’s trailing twelve month trading history, with the $28.00 strike highlighted in red:

Considering the fact that the $28.00 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 56%. 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 3.10% boost of extra return to the investor, or 43.58% 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, as well as the call contract example, are both approximately 41%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $27.38) to be 38%. 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

Announcing Custom Authentic Handcrafted Old Fashioned Natural Mattresses  by: Orange Mattress and Custom Bedding.  Family Business Since 1902.
Announcing Custom Authentic Handcrafted Old Fashioned Natural Mattresses by: Orange Mattress and Custom Bedding. Family Business Since 1902.
Clark, NJ, April 17, 2014 --(PR.com)-- Custom Bedding - Orange Mattress has been handcrafting natural mattresses for over 100 years. Their mattresses are made to order to customers' specifications. While searching...
 
 
Donald Rumsfeld Goes Tax Protester On IRS, But Should Aim At Congress
Donald Rumsfeld Goes Tax Protester On IRS, But Should Aim At Congress
Donald Rumsfeld was always direct. Now his signature bluntness is aimed at the IRS, although Congress arguably deserves his ire even more. In a letter to the IRS, he complains bitterly about our tax code. Its complexity...
 
 
China And Japan 'Face Off' Over $6 Billion Port Project On Remote Australian Beach
Encounters between China and Japan can be bruising, and sometimes bloody affairs, but on a remote western Australian beach there is a silent confrontation being played out between Asia’s superpowers. Although Japan was...
 
 
In Bid To Make Online Ads More Engaging, True[X] Taps Power Media Trio For Board
Before their buzz was usurped in the past year by so-called native advertising that’s designed to look like editorial content, engagement ads were touted by some as the next big thing in online advertising. The idea was...
 
 
 

Latest from the Network

Announcing Custom Authentic Handcrafted Old Fashioned Natural Mattresses by: Orange Mattress and Custom Bedding. Family Business Since 1902.
Clark, NJ, April 17, 2014 --(PR.com)-- Custom Bedding - Orange Mattress has been handcrafting natural mattresses for over 100 years. Their mattresses are made to order to customers&#39; specifications. While searching...
Read more on Sport Balla
 
Announcing Custom Authentic Handcrafted Old Fashioned Natural Mattresses by: Orange Mattress and Custom Bedding. Family Business Since 1902.
Clark, NJ, April 17, 2014 --(PR.com)-- Custom Bedding - Orange Mattress has been handcrafting natural mattresses for over 100 years. Their mattresses are made to order to customers&#39; specifications. While searching...
Read more on Business Balla
 
Peaches Geldof was being lined up for Australia's Next Top Model
Peaches Geldof was in talks for a role on 'Australia's Next Top Model'. The late star - whose death is still being treated as "unexplained" after being found dead in her home in Wrotham, Kent, England, on April 7 - was...
Read more on Celebrity Balla
 
Donald Rumsfeld Goes Tax Protester On IRS, But Should Aim At Congress
Donald Rumsfeld was always direct. Now his signature bluntness is aimed at the IRS, although Congress arguably deserves his ire even more. In a letter to the IRS, he complains bitterly about our tax code. Its complexity...
Read more on Business Balla
 
China And Japan 'Face Off' Over $6 Billion Port Project On Remote Australian Beach
Encounters between China and Japan can be bruising, and sometimes bloody affairs, but on a remote western Australian beach there is a silent confrontation being played out between Asia’s superpowers. Although Japan was...
Read more on Business Balla
 
In Bid To Make Online Ads More Engaging, True[X] Taps Power Media Trio For Board
Before their buzz was usurped in the past year by so-called native advertising that’s designed to look like editorial content, engagement ads were touted by some as the next big thing in online advertising. The idea was...
Read more on Business Balla
 
China's State Oil Conglomerates Backtrack On Refineries Plan
China’s state oil companies are delaying the expansion of new refineries as the market of refined oil products shows obvious signs of a glut. A postponed plan is the construction of a refinery near the city of Tianjin...
Read more on Business Balla
 
Is Arkansas' "Private Option" A Block Grant? Insurance Expert Bob Laszewski Thinks So, But He Is Wrong
During the past few months, insurance industry insider Bob Laszewski has chronicled many of the failures of ObamaCare’s launch. He has raised some very important questions and concerns from the insurance industry about...
Read more on Business Balla
 
Enterprises TV Airs in Waterloo, Dubuque and Cedar Rapids, IA in April
Coral Springs, FL, April 17, 2014 --(PR.com)-- The Waterloo-Cedar Rapids-Dubuque, Iowa area is one which is considered a regional center for many of the state&#8217;s residents. Waterloo is well-known for its art...
Read more on TV Balla
 
Evox Television Teams with Climate Documentarian Don Downey to Present “Open Source: Films From the Anthropocene”
San Francisco, CA, April 17, 2014 --(PR.com)-- evox Television (evox Omnimedia) presents a riveting three-part series from Don Downey: &#8220;Open Source: Films From the Anthropocene.&#8221; Viewers are privy to...
Read more on TV Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla