Investors in Yahoo! Inc. (YHOO) saw new options begin trading today, for the May 30th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the YHOO options chain for the new May 30th contracts and identified one put and one call contract of particular interest.
The put contract at the $33.50 strike price has a current bid of $1.59. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $33.50, but will also collect the premium, putting the cost basis of the shares at $31.91 (before broker commissions). To an investor already interested in purchasing shares of YHOO, that could represent an attractive alternative to paying $33.84/share today.
Because the $33.50 strike represents an approximate 1% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 56%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 4.75% return on the cash commitment, or 34.65% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Yahoo! Inc., and highlighting in green where the $33.50 strike is located relative to that history:
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV