Investors in Tesla Inc (Symbol: TSLA) saw new options begin trading today, due to expire on December 1st. At the Stock Options Channel, our YieldBoost formula has looked up and down the TSLA options chain for the new December 1st contracts and identified a put and a call contract of particular interest.
The put contract at the strike price of $255.00 has a current bid of $13.65. If an investor were to sell-to-open that put contract, they are obligated to buy the stock at $255.00 but will also collect the premium, which puts the cost basis of the stock at $241.35 (before brokerage commissions). For an investor already interested in buying shares of TSLA, that could represent an attractive alternative to paying $263.77/share today.
Because the $255.00 strike represents a discount of approximately 3% to the stock’s current trading price (in other words, it is out of the money by that percentage), there is also the possibility that the put contract will expire worthless. The current analytical data (including Greeks and implied Greeks) suggests that the current odds of that happening are 99%. Stock Options Channel will track these odds over time to see how they change and publish a chart of these numbers on our website under the contract details page for that contract. If the contract expires worthless, the premium will represent a return of 5.35% on the cash commitment, or 39.04% on an annualized basis — at the Stock Options Channel we call this YieldBoost.
Below is a chart showing the trailing 12-month trading history for Tesla Inc, highlighting in green where the $255.00 strike is positioned relative to that history:
Turning to the call side of the options chain, the call contract at the $290.00 strike price has a current bid of $9.20. If an investor were to buy shares of TSLA stock at the current price level of $263.77/share and then sell to open the call contract as a “covered call,” they would commit to selling the stock at $290.00. Given that the call seller will also collect the premium, calling the stock at the December 1 expiration (before brokerage commissions) would yield a total return (excluding any dividends) of 13.43%. Of course, a lot of upside could potentially be left on the table if TSLA shares really rise, which is why it becomes important to look at the trailing 12-month trading history for Tesla Inc. Below is a chart showing TSLA’s trailing 12-month trading history, with the $290.00 strike highlighted in red:
Given the fact that the $290.00 strike represents an approximate 10% premium to the stock’s current trading price (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) suggests that the current odds of that happening are 99%. On our website under the contract detail page for this contract, the stock options channel will track these odds over time to see how they change and publish a chart of these numbers (the trading history of the options contract will also be charted). If the covered call expires worthless, the premium will represent an additional 3.49% return to the investor, or 25.44% annualized, which we call YieldBoost.
Meanwhile, we calculate the actual trailing 12-month volatility (considering the last 251 trading days’ closing values as well as today’s price of $263.77) to be 60%. For more bid and call option contracts worth watching, visit StockOptionsChannel.com.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.