360° Coverage : First Week of October 18th Options Trading For Avago...

2 Updates
First Week of October 18th Options Trading For Avago Technologies (AVGO)
Photo Credit: Forbes Business

First Week of October 18th Options Trading For Avago Technologies (AVGO)

Mar 3 2014, 10:47am CST | by

Investors in Avago Technologies Ltd (NASD: AVGO) saw new options begin trading this week, for the October 18th expiration. One of the key data points that goes into the price an option buyer is...

Filed under: news

 
 
 

28 weeks ago

First Week of October 18th Options Trading For Avago Technologies (AVGO)

Mar 3 2014, 10:47am CST | by

Investors in Avago Technologies Ltd (NASD: AVGO) saw new options begin trading this week, for the October 18th expiration. One of the key data points that goes into the price an option buyer is willing to pay, is the time value, so with 229 days until expiration the newly trading contracts represent a possible 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 AVGO options chain for the new October 18th contracts and identified one put and one call contract of particular interest.

The put contract at the $60.00 strike price has a current bid of $5.20. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $60.00, but will also collect the premium, putting the cost basis of the shares at $54.80 (before broker commissions). To an investor already interested in purchasing shares of AVGO, that could represent an attractive alternative to paying $61.79/share today.

Because the $60.00 strike represents an approximate 3% 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 59%. 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 8.67% return on the cash commitment, or 13.82% 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 Avago Technologies Ltd, and highlighting in green where the $60.00 strike is located relative to that history:

Turning to the calls side of the option chain, the call contract at the $62.50 strike price has a current bid of $5.10. If an investor was to purchase shares of AVGO stock at the current price level of $61.79/share, and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $62.50. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 9.40% 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 AVGO shares really soar, which is why looking at the trailing twelve month trading history for Avago Technologies Ltd, as well as studying the business fundamentals becomes important. Below is a chart showing AVGO’s trailing twelve month trading history, with the $62.50 strike highlighted in red:

Considering the fact that the $62.50 strike represents an approximate 1% 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 49%. 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 8.25% boost of extra return to the investor, or 13.16% 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 31%, while the implied volatility in the call contract example is 30%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $61.79) to be 30%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.

Source: Forbes Business

 
Update
2

3 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slash ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

3 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" hit ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

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

Monali Thakur ecstatic to win best actress award in Washington
Mumbai, Sep 20 (IANS) She's more known for her singing. But Monali Thakur of "Sawaar loon" fame, who has shown her acting talent with a hard-hitting performance as a child prostitute in Nagesh Kukunoor's "Lakshmi", is presently ecstatic about winning the best actress award at the recently concluded Washington DC South Asian Film Festival.
 
 
Societal stress worsens domestic violence in same-sex couples
New York, Sep 20 (IANS) The additional stress of being a sexual minority has exacerbated domestic violence episodes among same-sex couples compared with opposite-sex couples, new research says.
 
 
New biosensor to diagnose cancer in a jiffy
London, Sep 20 (IANS) An ultra-sensitive biosensor made from the wonder material graphene has been used to detect molecules that indicate an increased risk of developing cancer.
 
 
Mission set up to combat Ebola: UN
United Nations, Sep 20 (IANS) UN Secretary General Ban Ki-moon has said that he has established a UN mission to combat Ebola with the advance teams to be deployed to West Africa Monday.
 
 
 

Latest from the Network

Exercise good for people undergoing chemotherapy
New York, Sep 20 (IANS) Exercise has multiple benefits and researchers suggest that exercise may have an added benefit for cancer patients undergoing chemotherapy. Their work, performed on a melanoma mouse model,...
Read more on Business Balla
 
Windies women steal last-over win over New Zealand
Basseterre (St. Kitts), Sep 20 (IANS/CMC) Seamer Shakera Selman bowled a brilliant last over as the West Indies women's cricket team snatched a thrilling four-run victory over New Zealand to complete their sweep of the...
Read more on Sport Balla
 
Was that a UFO?
London, Sep 20 (IANS) An encouraging development has taken place for those who believe in extra-terrestrial life. People in Portsmouth saw an unidentified flying object (UFO) in the sky at dusk. According to a met...
Read more on Politics Balla
 
I'm no savior: Nilmar
Rio De Janeiro, Sep 20 (IANS) Former Villarreal striker Nilmar has urged fans not to consider him a "savior" as he attempts to help Internacional end a 35-year title drought in Brazil's Serie A football league. The 30...
Read more on Sport Balla
 
White House evacuated briefly after intruder alert
Washington, Sep 20 (IANS) A part of the White House was evacuated after a disturbance was detected on the North Lawn, media reported Saturday. A man jumped the fence at the White House late Friday night and made it...
Read more on Politics Balla
 
Bucharest will be ready for Euro 2020: Mayor
Bucharest, Sep 20 (IANS) Romania's capital city Bucharest will be ready to host 2020 European football championship matches, Mayor Sorin Oprescu said. Bucharest has been selected as one of the 13 host cities for the...
Read more on Sport Balla
 
225 MH17 victims identified
The Hague, Sep 20 (IANS) The number of victims identified in the crashed Malaysia Airlines flight MH17 has now climbed to 225. The Dutch ministry of security and justice Friday said that out of 14 more who have been...
Read more on Politics Balla
 
Quarantine measures making Ebola outbreak spread: Study
Washington, Sep 20 (IANS) New Ebola cases could reach 6,800 in West Africa by the end of the month if new control measures are not enacted, warn researchers. Through modelling analysis, a team from Arizona State...
Read more on Business Balla
 
Typhoon kills eight in China
Beijing, Sep 20 (IANS) At least eight people were killed and two were missing as typhoon Kalmaegi hit China, officials said Saturday. On Sep 17, a group of 395 students and teachers, who got trapped on the first floor...
Read more on Politics Balla
 
Ukrainian government, rebels agree on weapon-free zone
Minsk, Sep 20 (IANS) Representatives from the Ukrainian government and pro-Russian rebel groups from eastern Ukraine Saturday signed a deal to establish a weapon-free zone after holding peace talks in the Belarusian...
Read more on Politics Balla