Russ Cohen

Options Market Analysis: Ford’s May 17th Strategy

Opportunities in Option Trading

Today, options began trading for Ford Motor Co. (Symbol: F) with a May 17th expiration date. The time value is a significant factor in determining the price of an option. At 128 days until expiration, the newly trading contracts offer an opportunity for sellers. Stock Options Channel’s YieldBoost formula has identified one put and one call contract of particular interest.

Potential for Higher Premiums

The put contract at the $11.00 strike price holds a current bid of 58 cents. Selling-to-open this put contract commits to purchasing the stock at $11.00, offset by collecting the premium, effectively putting the cost basis of the shares at $10.42 (before broker commissions). This presents an intriguing alternative to the current share price of $11.78.

Given that the $11.00 strike represents an approximate 7% discount to the current trading price of the stock, there is a chance that the put contract may expire worthless. The current analytical data suggests the odds of this happening are 99%. In the event of expiration, the premium would represent a 5.27% return on the cash commitment, or 15.04% annualized — referred to as the YieldBoost.

Chart Analysis

An accompanying chart shows the trailing twelve month trading history for Ford Motor Co., with the $11.00 strike highlighted, providing visual context for prospective traders.

Call Contract Analysis

The call contract at the $13.00 strike price holds a current bid of 40 cents. Purchasing shares of F stock at the current price level of $11.78/share and selling-to-open that call contract as a “covered call” commits to selling the stock at $13.00. This could realize a total return of 13.75% if the stock gets called away at the May 17th expiration, excluding dividends.

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Given the $13.00 strike represents an approximate 10% premium to the current trading price of the stock, there is a possibility it may expire worthless. The current analytical data indicates the odds of that happening are 99%, translating to a 3.40% boost of extra return to the investor or 9.69% annualized, known as the YieldBoost.

Historical Volatility and Further Opportunities

The actual trailing twelve month volatility is calculated to be 36%. For more put and call options contract ideas worth exploring, investors can visit StockOptionsChannel.com.

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