First Week Of UPL March 2014 Options Trading

Investors in Ultra Petroleum Corp. ( UPL) saw new options become available this week, for the March 2014 expiration. One of the key data points that goes into the price an option buyer is willing to pay, is the time value, so with 242 days until expiration the newly available contracts represent a potential opportunity for sellers of puts or calls to achieve a higher premium than would be available for the contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the UPL options chain for the new March 2014 contracts and identified one put and one call contract of particular interest.

The put contract at the $21.00 strike price has a current bid of $2.15. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $21.00, but will also collect the premium, putting the cost basis of the shares at $18.85 (before broker commissions). To an investor already interested in purchasing shares of UPL, that could represent an attractive alternative to paying $21.68/share today.

Because the $21.00 strike represents an approximate 3% 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 60%. 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 10.24% return on the cash commitment, or 15.44% annualized — at Stock Options Channel we call this the YieldBoost.

START SLIDESHOW:
Top YieldBoost Puts of the S&P 500 »

Below is a chart showing the trailing twelve month trading history for Ultra Petroleum Corp., and highlighting in green where the $21.00 strike is located relative to that history:

If you liked this article you might like

Will Seed and Farm-Chemical Producers Sow Our Food Needs in Asia?

Stressed Out: Valeant, LendingClub and Retailers Join Our Distress List as Steelmakers Fall Off

Stressed Out: Valeant, LendingClub and Retailers Join the List as Steelmakers Break the Mold

Can Ultra Petroleum Work Out a Deal With Creditors?

Stressed Out: Is Bankruptcy the Best Place for Ultra Petroleum?

Stressed Out: Is Bankruptcy the Best Place for Ultra Petroleum?