October 18th Options Now Available For General Growth Properties (GGP)

Feb 24 2014, 10:50am CST | by

October 18th Options Now Available For General Growth Properties (GGP)
Photo Credit: Forbes Business

Investors in General Growth Properties Inc (NYSE: GGP) saw new options begin trading today, for the October 18th expiration. One of the key inputs that goes into the price an option buyer is willing to pay, is the time value, so with 236 days until expiration the newly trading contracts represent a potential opportunity for sellers of puts or calls to achieve a higher premium than would be available for the contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the GGP options chain for the new October 18th contracts and identified one put and one call contract of particular interest.

The put contract at the $20.00 strike price has a current bid of 51 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $20.00, but will also collect the premium, putting the cost basis of the shares at $19.49 (before broker commissions). To an investor already interested in purchasing shares of GGP, that could represent an attractive alternative to paying $22.44/share today.

Because the $20.00 strike represents an approximate 11% 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 73%. 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 2.55% return on the cash commitment, or 3.94% annualized — at Stock Options Channel we call this the YieldBoost.

Click here to find out the Top YieldBoost Puts of the REITs »

Below is a chart showing the trailing twelve month trading history for General Growth Properties Inc, and highlighting in green where the $20.00 strike is located relative to that history:

Turning to the calls side of the option chain, the call contract at the $23.00 strike price has a current bid of 57 cents. If an investor was to purchase shares of GGP stock at the current price level of $22.44/share, and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $23.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 5.04% if the stock gets called away at the October 18th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if GGP shares really soar, which is why looking at the trailing twelve month trading history for General Growth Properties Inc, as well as studying the business fundamentals becomes important. Below is a chart showing GGP’s trailing twelve month trading history, with the $23.00 strike highlighted in red:

Considering the fact that the $23.00 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 55%. 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 2.54% boost of extra return to the investor, or 3.93% annualized, which we refer to as the YieldBoost.

Click here to find out the Top YieldBoost Calls of the REITs »

The implied volatility in the put contract example is 25%, while the implied volatility in the call contract example is 21%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $22.44) to be 19%. 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

For Working Women, Focus On Beauty Erodes Self Confidence
In a guest post last month, “‘Princeton Mom’ Gives Dumb Advice On Marrying Smart,” Lisa Endlich Heffernan rebutted the argument that smart girls who don’t find husbands in college are destined for spinsterhood. Here she...
 
 
A Compelling Case for the Mid Cap Value ETF (IWS)
U.S. equity markets have struggled to maintain the bullish momentum seen throughout 2013. While the broader market has managed to stay afloat, certain sectors have fallen from the record highs enjoyed last year;...
 
 
CDC Would Sacrifice Kids To Cut Healthcare Costs
The U.S. Centers for Disease Control and Prevention (CDC) appears to have assumed a role that was never intended: reducing the ability of vaccines to save lives.  At their past two meetings, the CDC’s vaccine advisory...
 
 
How You'll Know It's Time To Kill Off One Of Your Products or Services
I got this question the other day. It seemed like a good idea when I started.  But, I am not making any money on my offering, nor do I seem to be gaining traction.  Is there any clear benchmark on when I should shut...
 
 
 

Latest from the Network

Laura Prepon: Tom Cruise is hot
Laura Prepon thinks Tom Cruise is "hot". The 'Orange is the New Black' actress insists rumors she is dating the 'Mission: Impossible' star are untrue, but she is "flattered" by the speculation, even though she finds it...
Read more on Celebrity Balla
 
Meryl Streep tired of awards
Meryl Streep "hates" inviting people to awards ceremonies. The 64-year-old actress - who has been nominated for an Oscar 18 times and won three of the coveted statuettes - picked up the 14th annual Monte Cristo Award by...
Read more on Celebrity Balla
 
Leslie Mann regrets using marriage as inspiration for This Is 40
Leslie Mann regrets using her marriage as inspiration for 'This Is 40'. The 'Other Woman' star admits she became "annoyed" by the "invasive" questions about her relationship with director Judd Apatow when she starred...
Read more on Celebrity Balla
 
A Compelling Case for the Mid Cap Value ETF (IWS)
U.S. equity markets have struggled to maintain the bullish momentum seen throughout 2013. While the broader market has managed to stay afloat, certain sectors have fallen from the record highs enjoyed last year;...
Read more on Business Balla
 
CDC Would Sacrifice Kids To Cut Healthcare Costs
The U.S. Centers for Disease Control and Prevention (CDC) appears to have assumed a role that was never intended: reducing the ability of vaccines to save lives.  At their past two meetings, the CDC’s vaccine advisory...
Read more on Business Balla
 
Apple vs. Samsung Patent Case Pulls Google Into The Spotlight To Back Its Android Partner
There are a lot of interesting facts, presentations, and historical detail coming out of the Apple vs. Samsung patent case currently under way. It is also slowly reeling in Google’s flavour of Android into the spotlight...
Read more on Apple Balla
 
Quentin Tarantino's Gawker lawsuit dismissed
Quentin Tarantino's lawsuit against Gawker has been dismissed. The award-winning director was furious when the website posted a link to a leaked copy of his 'Hateful Eight' script, forcing him to scrap plans for the...
Read more on Movie Balla
 
Catherine Hardwicke to helm Miss You Already
Catherine Hardwicke will direct 'Miss You Already'. The 58-year-old filmmaker will helm the picture which has Rachel Weisz and Toni Collette attached to star while Morwenna Banks penned the script based on personal...
Read more on Movie Balla
 
How You'll Know It's Time To Kill Off One Of Your Products or Services
I got this question the other day. It seemed like a good idea when I started.  But, I am not making any money on my offering, nor do I seem to be gaining traction.  Is there any clear benchmark on when I should shut...
Read more on Business Balla
 
New Impact Investment Fund At Columbia Launched To Solve Big Social Problems
A team of young social entrepreneurs has created an impact investing fund at Columbia University called 118 Capital that will operate as a nonprofit. The founders all have recent degrees from Columbia. 118 Capital will...
Read more on Business Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla