Turning to the other side of the option chain, we highlight one call contract of particular interest for the May expiration, for shareholders of Boeing Co. (BA) looking to boost their income beyond the stock's 2.3% annualized dividend yield. Selling the covered call at the $128 strike and collecting the premium based on the $3.20 bid, annualizes to an additional 20% rate of return against the current stock price (this is what we at Stock Options Channel refer to as the YieldBoost), for a total of 22.3% annualized rate in the scenario where the stock is not called away. Any upside above $128 would be lost if the stock rises there and is called away, but BA shares would have to advance 0.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 3.3% return from this trading level, in addition to any dividends collected before the stock was called.
The chart below shows the trailing twelve month trading history for Boeing Co. , highlighting in green where the $124 strike is located relative to that history, and highlighting the $128 strike in red:The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the May put or call options highlighted in this article deliver a rate of return that represents good reward for the risks. We calculate the trailing twelve month volatility for Boeing Co. (considering the last 252 trading day BA historical stock prices using closing values, as well as today's price of $126.89) to be 22%. In mid-afternoon trading on Monday, the put volume among S&P 500 components was 936,812 contracts, with call volume at 936,812, for a put:call ratio of 0.75 so far for the day, which is above normal compared to the long-term median put:call ratio of .65. In other words, if we look at the number of call buyers and then use the long-term median to project the number of put buyers we'd expect to see, we're actually seeing more put buyers than expected out there in options trading so far today. Find out which 15 call and put options traders are talking about today.
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