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First Week of March 22nd Options Trading For Broadcomn (BRCM)

First Week of March 22nd Options Trading For Broadcomn (BRCM)

Jan 27 2014, 10:37am CST | by

Investors in Broadcom Corp. (NASD: BRCM ) saw new options begin trading this week, for the March 22nd expiration. At Stock Options Channel , our YieldBoost formula has looked up and down the BRCM...

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25 weeks ago

First Week of March 22nd Options Trading For Broadcomn (BRCM)

Jan 27 2014, 10:37am CST | by

Investors in Broadcom Corp. (NASD: BRCM ) saw new options begin trading this week, for the March 22nd expiration. At Stock Options Channel , our YieldBoost formula has looked up and down the BRCM options chain for the new March 22nd contracts and identified one put and one call contract of particular interest.

The put contract at the $29.00 strike price has a current bid of $1.08. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $29.00, but will also collect the premium, putting the cost basis of the shares at $27.92 (before broker commissions). To an investor already interested in purchasing shares of BRCM, that could represent an attractive alternative to paying $29.55/share today.

Because the $29.00 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 58%. 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 3.72% return on the cash commitment, or 25.19% annualized — at Stock Options Channel we call this the YieldBoost.

Click here to find out the Top YieldBoost Puts of the Nasdaq 100 »

Below is a chart showing the trailing twelve month trading history for Broadcom Corp., and highlighting in green where the $29.00 strike is located relative to that history:

Turning to the calls side of the option chain, the call contract at the $30.00 strike price has a current bid of $1.05. If an investor was to purchase shares of BRCM stock at the current price level of $29.55/share, and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $30.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 5.08% if the stock gets called away at the March 22nd expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if BRCM shares really soar, which is why looking at the trailing twelve month trading history for Broadcom Corp., as well as studying the business fundamentals becomes important. Below is a chart showing BRCM’s trailing twelve month trading history, with the $30.00 strike highlighted in red:

Considering the fact that the $30.00 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 54%. 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 3.55% boost of extra return to the investor, or 24.04% annualized, which we refer to as the YieldBoost.

Click here to find out the Top YieldBoost Calls of the Nasdaq 100 »

The implied volatility in the put contract example is 30%, while the implied volatility in the call contract example is 29%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $29.55) to be 28%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.

Source: Forbes Business

 
Update
10

6 weeks ago

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KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told to ...
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Update
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6 weeks ago

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KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rak ...
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Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri His ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

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PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in ...
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Update
5

6 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

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KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 mi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

6 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Mini ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

6 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

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JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 mill ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

6 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

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PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme 2014 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

6 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Ki ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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