First Week of February 2014 Options Trading For RealPage (RP)

Investors in RealPage Inc (RP) saw new options become available this week, for the February 2014 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the RP options chain for the new February 2014 contracts and identified one put and one call contract of particular interest.

The put contract at the $20.00 strike price has a current bid of 15 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $20.00, but will also collect the premium, putting the cost basis of the shares at $19.85 (before broker commissions). To an investor already interested in purchasing shares of RP, that could represent an attractive alternative to paying $22.53/share today.

Because the $20.00 strike represents an approximate 11% 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 80%. 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 0.75% return on the cash commitment, or 5.17% 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 RealPage Inc, and highlighting in green where the $20.00 strike is located relative to that history:

Loading+chart++2013+TickerTech.com

Turning to the calls side of the option chain, the call contract at the $25.00 strike price has a current bid of 5 cents. If an investor was to purchase shares of RP stock at the current price level of $22.53/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $25.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 11.19% if the stock gets called away at the February 2014 expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if RP shares really soar, which is why looking at the trailing twelve month trading history for RealPage Inc, as well as studying the business fundamentals becomes important. Below is a chart showing RP's trailing twelve month trading history, with the $25.00 strike highlighted in red:

Loading+chart++2013+TickerTech.com

Considering the fact that the $25.00 strike represents an approximate 11% premium 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 covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 75%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 0.22% boost of extra return to the investor, or 1.53% annualized, which we refer to as the YieldBoost.

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

The implied volatility in the put contract example is 42%, while the implied volatility in the call contract example is 36%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $22.53) to be 27%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.

More from Stocks

Tech Stocks Have You Baffled? Educate Yourself in Some Portfolio Diversification

Tech Stocks Have You Baffled? Educate Yourself in Some Portfolio Diversification

Alphabet Shares Rise on Earnings, Revenue Beat But Some Concerns Remain

Alphabet Shares Rise on Earnings, Revenue Beat But Some Concerns Remain

Semiconductor Stocks Get Smashed Again as Earnings Weakness Continues
Dow and Nasdaq Finish Lower as 10-Year Treasury Yield Hovers Near 3%

Dow and Nasdaq Finish Lower as 10-Year Treasury Yield Hovers Near 3%

Video: Jim Cramer on Trade Tariffs, Rising Rates, Kimberly Clark and Hasbro

Video: Jim Cramer on Trade Tariffs, Rising Rates, Kimberly Clark and Hasbro