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

First Italian female astronaut ready for spaceflight
Rome, Nov 24 (IANS) History will be made Monday with the first ever Italian female astronaut set to go into space for a mission on board the International Space Station (ISS).
 
 
Mummy wearing jewellery unearthed in Egypt
London, Nov 23 (IANS) Spanish archaeologists have discovered about 4,000 years old female mummy wearing rare jewellery in Egypt.
 
 
Exercise and fasting could boost brain's functions
Washington, Nov 23 (IANS) Exercise along with occasional fasting is good for boosting the brain's neurons, shows a new research.
 
 
One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days.
 
 
 

Latest from the Network

Political leader shot dead in Pakistan
Karachi, Nov 24 (IANS) A leader of the Awami National Party (ANP), Ziauddin was gunned down Sunday by unknown assailants in Orangi Town in the Pakistani city of Karachi, media reported. According to police, the leader...
Read more on Politics Balla
 
Israeli cabinet pushes to make country 'Jewish state' by law
Jerusalem, Nov 24 (IANS) The Israeli cabinet approved a bill Sunday, which enshrines in law that Israel is the national homeland of the Jewish people and that this right is unique to them. Fifteen ministers voted in...
Read more on Politics Balla
 
When Lily Allen's sex life 'lacked magic'
Los Angeles, Nov 24 (IANS) Singer Lily Allen, who says she didn't enjoy a great sex life until she was in her mid-20s, believes sex needs to be reprented as an "emotive experience" in popular media. She says the media...
Read more on Celebrity Balla
 
Bangladesh beats Zimbabwe in second ODI
Dhaka, Nov 24 (IANS) Bangladesh beat Zimbabwe by 68 runs in the second one day international (ODI) at the Zahur Ahmed Chowdhury stadium in Chittagong Sunday, to go 2-0 up in the five-match cricket series. Batting...
Read more on Sport Balla
 
Stand up for your rights, Imran Khan tells Pakistanis
Islamabad, Nov 24 (IANS) Pakistan Tehreek-i-Insaf (PTI) chief Imran Khan said Sunday that the people of Pakistan must stand up for their rights, when the party holds a rally Nov 30 in Islamabad. Addressing a public...
Read more on Politics Balla
 
Ryan Reynolds' 'scary' father
Ryan Reynolds thought his father was ''scary''. 'The Proposal' star - who is expecting his first child with his wife, Blake Lively - has admitted that his dad worked incredibly ''tirelessly'' to provide for their family...
Read more on Celebrity Balla
 
Demi Lovato 'serious' about boyfriend
Demi Lovato is getting ''serious'' with her boyfriend. The 'Neon Lights' hitmaker - who is currently dating 34-year-old Wilmer Valderrama - is reportedly hoping he will pop the question soon. A friend of the star said...
Read more on Celebrity Balla
 
Scott Disick 'excited' to meet baby
Scott Disick is ''excited'' to meet his new baby. The television personality - who already has Mason, 4 and 2-year-old Penelope with his longtime girlfriend Kourtney Kardashian - can't wait for their son or daughter to...
Read more on Celebrity Balla
 
Jessie J wants beau like her dad
Los Angeles, Nov 24 (IANS) A perfect man for singer Jessie J would mean someone like her father. The 'Bang Bang' hitmaker is currently dating singer Luke James. She says she loves the way her social worker father...
Read more on Celebrity Balla
 
Heavy rains in Morocco leave six dead, 10 missing
Rabat, Nov 24 (IANS/EFE) Six people were killed and 10 others reported missing in heavy rains in southern Morocco, official sources said. According to health officials, the tragedy happened in an area outside...
Read more on Politics Balla