New Opportunities for Options Trading
Advanced Micro Devices Inc (Symbol: AMD) presented investors with new options for the January 2025 expiration this week. The time value is a crucial determinant in the option price, and with 347 days until expiration, these newly available contracts offer potential opportunities for sellers of puts or calls to achieve a higher premium than those with a closer expiration.
Put Contract Analysis
One intriguing put contract at the $170.00 strike price comes with a current bid of $24.15. Any investor selling-to-open that put contract commits to purchasing the stock at $170.00 but will also collect the premium, setting the cost basis of the shares at $145.85 (before broker commissions). This might represent an attractive alternative to paying $174.00/share today for an investor interested in purchasing AMD shares.
The $170.00 strike being approximately 2% below the current trading price of the stock suggests that there is a 63% chance of the put contract expiring worthless. The premium would then represent a 14.21% return on the cash commitment, or 14.94% annualized, known as the “YieldBoost.”
Call Contract Analysis
On the calls side, a call contract at the $195.00 strike price holds a current bid of $25.35. If an investor purchases shares of AMD at the current price level of $174.00/share and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $195.00. This could generate a total return of 26.64% if the stock gets called away at the January 2025 expiration (before broker commissions).
The $195.00 strike, being approximately 12% above the current trading price of the stock, suggests a 47% chance of the covered call contract expiring worthless. If this happens, the premium would represent a 14.57% extra return to the investor, or 15.32% annualized, known as the “YieldBoost.”
Volatility and Future Considerations
The implied volatility in the put contract example stands at 46%, while the implied volatility in the call contract example is 45%. Considering the actual trailing twelve-month volatility at 45%, there are opportunities for put and call options contract ideas worth exploring at StockOptionsChannel.com.
Final Considerations
These options present intriguing opportunities for investors in Advanced Micro Devices Inc. The history of trading patterns coupled with fundamental analysis should guide any decisions to capitalize on the available contracts. Nevertheless, the potential returns and risks should be carefully considered before making any trading moves.
