Investors in LRR Energy, L.P. (LRE) saw new options become available this week, for the December 20th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the LRE options chain for the new December 20th contracts and identified the following call contract of particular interest.The call contract at the $10.00 strike price has a current bid of 25 cents. If an investor was to purchase shares of LRE stock at the current price level of $9.54/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $10.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 7.44% if the stock gets called away at the December 20th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if LRE shares really soar, which is why looking at the trailing twelve month trading history for LRR Energy, L.P., as well as studying the business fundamentals becomes important. Below is a chart showing LRE's trailing twelve month trading history, with the $10.00 strike highlighted in red: Considering the fact that the $10.00 strike represents an approximate 5% 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 59%. 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 2.62% boost of extra return to the investor, or 53.14% annualized, which we refer to as the YieldBoost. The implied volatility in the call contract example above is 81%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $9.54) to be 42%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
TheStreet’s Fundamentals of Investing Course will teach you the keys to making the right decisions in any market.
TheStreet’s Personal Finance Essentials Course will teach you money management basics and investing strategies to help you avoid major financial pitfalls.
TheStreet Courses offers dedicated classes designed to improve your investing skills, stock market knowledge and money management capabilities.
More from Stocks
Boeing, Airbus and United Technologies - 3 Things to Watch at Paris Air Show
Boeing, Airbus, United Technologies among the big reveals at the 2019 Paris Air Show.
How Facebook Might Make Money From Its Highly-Anticipated Cryptocurrency
Facebook is expected to release a white paper on GlobalCoin, its forthcoming cryptocurrency, on Tuesday.
Stocks End Slightly Higher in Cautious Trading Ahead of Federal Reserve Meeting
Stocks end moderately ahead as investors are adopting a cautious stance heading into this week's Federal Reserve meeting.
Medical Marijuana Card: Everything You Need to Know
Trying to get a medical marijuana card? Here's what you need to know.
Apple's Reported 2020 iPhone Plans Are a Positive for Broadcom
According to a new report from a respected analyst, Apple plans to launch 5.4-inch and 6.7-inch flagship iPhones next year, each of which will feature quite a few Broadcom 5G RF chips.