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

Oops! US Airways Didn't Mean To Post THAT Tweet
Oops! US Airways Didn't Mean To Post THAT Tweet
US Airways has been left red-faced after posting an embarrassing tweet on its official Twitter account. The error is the latest in a line of gaffes by different companies on social media, highlighting the problems many...
 
 
A Lucky Drug Made Pharmacyclics' Robert Duggan A Billionaire. Will Long-Term Success Follow?
A Lucky Drug Made Pharmacyclics' Robert Duggan A Billionaire. Will Long-Term Success Follow?
Robert Duggan was enjoying just your average Tampa vacation–a visit to the headquarters of the Church of Scientology, to which he’s a major donor, and a double date with one of the world’s top supermodels–when a board...
 
 
Emerging Markets: Separating The Sheep And The Goats
Investors who thought emerging markets were the bee’s knees have suffered agonizing reappraisals. After several years of Federal Reserve-fueled rallies, less developed markets are now in the doldrums. Emerging economies...
 
 
Tencent WeChat and SINA Weibo: The Frenemies of the Chinese Mobile Space
Tencent WeChat and SINA Weibo: The Frenemies of the Chinese Mobile Space
Once the darling of tech investors, Sina (NASDAQ: SINA) Weibo failed to excite Asian investors during its pre-IPO investor education in Hong Kong last week. Sina is expected to spin off its Weibo social networking...
 
 
 

Latest from the Network

Oops! US Airways Didn't Mean To Post THAT Tweet
US Airways has been left red-faced after posting an embarrassing tweet on its official Twitter account. The error is the latest in a line of gaffes by different companies on social media, highlighting the problems many...
Read more on Business Balla
 
A Lucky Drug Made Pharmacyclics' Robert Duggan A Billionaire. Will Long-Term Success Follow?
Robert Duggan was enjoying just your average Tampa vacation–a visit to the headquarters of the Church of Scientology, to which he’s a major donor, and a double date with one of the world’s top supermodels–when a board...
Read more on Business Balla
 
Emerging Markets: Separating The Sheep And The Goats
Investors who thought emerging markets were the bee’s knees have suffered agonizing reappraisals. After several years of Federal Reserve-fueled rallies, less developed markets are now in the doldrums. Emerging economies...
Read more on Business Balla
 
Tencent WeChat and SINA Weibo: The Frenemies of the Chinese Mobile Space
Once the darling of tech investors, Sina (NASDAQ: SINA) Weibo failed to excite Asian investors during its pre-IPO investor education in Hong Kong last week. Sina is expected to spin off its Weibo social networking...
Read more on Business Balla
 
Voices From The Vineyard: Fado Singing In The Duoro Valley
This series, Voices from the Vineyard, shines a light on the people who actually do the work — the physical labor — of making wine in the field. Though it is often overlooked in favor of the winemaking part of the...
Read more on Business Balla
 
The Next Big Business Buzzword: Ecosystem?
Words are funny things.  Business words are even funnier. That’s because, in actuality, there aren’t that many new business ideas.  Most of the time, we just slap new labels onto old things.  For example, your “core...
Read more on Business Balla
 
Has Healthcare Embraced A Hit-And-Run Strategy?
Sovaldi is off to the races — the biggest and most successful drug launch, by far, in the history of the industry. This is a truly remarkable achievement, a combination of derring-do and flawless execution that has...
Read more on Business Balla
 
Energy Companies Need To Remake Their Boards, Before Activists Force Them To
This is a guest article written by Steven Goodman, Roger Aguirre and Avery Marcus in the Global Energy Practice of Egon Zehnder. The firm specializes in CEO and senior-level executive search, board consulting and...
Read more on Business Balla
 
Court rejects bankruptcy protection for Mt. Gox
TOKYO (AP) — The Mt. Gox bitcoin exchange in Tokyo is headed for liquidation after a court rejected its bankruptcy protection application. Mt. Gox said Wednesday the Tokyo District Court decided the...
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