As Netflix Inc (Symbol: NFLX) investors eye the April 19th expiration, new options have entered the arena. With 93 days until expiration, these contracts offer a potential opportunity for sellers of puts or calls to secure a higher premium than those with a closer expiration, chiefly due to time value. Our YieldBoost formula, located at Stock Options Channel, scrutinizes the NFLX options chain for the new April 19th contracts and has identified an intriguing put and call contract.
Interesting Put Contract
Marked by a $475.00 strike price, the put contract currently boasts a bid of $31.60. Selling-to-open this put contract binds the investor to buy the stock at $475.00, yet they also collect the premium, enabling them to secure the stock at a cost basis of $443.40 (before broker commissions). This represents a 1% discount to the current trading price of NFLX, potential buyers of NFLX shares could find this an attractive alternative to paying $477.62/share today.
Given its approximately 1% out-of-the-money status, there’s a chance the put contract could expire worthless. The current odds of that occurring, per our analytics (inclusive of greeks and implied greeks), stand at 56%. Stock Options Channel will continuously monitor these odds, ultimately revealing the numbers through a published chart on our website. Should the contract expire worthless, the premium would represent an enticing 6.65% return on the cash commitment or a 26.12% annualized return, which we refer to as the YieldBoost.
Captivating Call Contract
At the $490.00 strike price, the call contract carries a current bid of $32.55. Buying shares of NFLX stock at the current price level of $477.62/share and then selling-to-open that call contract as a “covered call” commits the investor to sell the stock at $490.00. Factoring in the premium collected, this would drive a total return (excluding dividends, if any) of 9.41% if the stock gets called away at the April 19th expiration (before broker commissions). However, if NFLX shares soar, there’s potential for a lot of upside left on the table, making it crucial to consider the trailing twelve month trading history for Netflix Inc, as well as studying the business fundamentals. Below is a chart showing NFLX’s trailing twelve month trading history, with the $490.00 strike highlighted in red:
Since the $490.00 strike represents an approximate 3% premium to the current trading price of the stock, there’s also a possibility that the covered call contract would expire worthless. Our current analytical data suggests the odds of that happening are 49%. Stock Options Channel will diligently track these odds over time on our website, giving visibility into their evolution and publishing a chart of those numbers. If the covered call contract expires worthless, the premium would yield a 6.82% boost of extra return to the investor or a 26.76% annualized return, denoted as the YieldBoost.
Implications and Volatility
The implied volatility in the put contract example is 38%, whereas in the call contract example, it stands at 37%. Calculating the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $477.62) to be 37%, these insights enrich the options evaluation for potential investors, guiding the decision-making process. For more put and call options contract ideas worth exploring, visit StockOptionsChannel.com.
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