Investors in Walter Investment Management Corp (WAC saw new options become available today, for the July 21st expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the WAC options chain for the new July 21st contracts and identified the following call contract of particular interest.The call contract at the $2.00 strike price has a current bid of 10 cents. If an investor was to purchase shares of WAC stock at the current price level of $1.55/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $2.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 35.48% if the stock gets called away at the July 21st expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if WAC shares really soar, which is why looking at the trailing twelve month trading history for Walter Investment Management Corp, as well as studying the business fundamentals becomes important. Below is a chart showing WAC's trailing twelve month trading history, with the $2.00 strike highlighted in red: Considering the fact that the $2.00 strike represents an approximate 29% 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 52%. 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 6.45% boost of extra return to the investor, or 39.25% annualized, which we refer to as the YieldBoost. The implied volatility in the call contract example above is 164%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today's price of $1.55) to be 120%. 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
Elon Musk Promises 'Over a Million' Tesla Robotaxis by the End of 2020
The Tesla CEO told investors that Tesla would have a fleet of autonomous robotaxis by the end of next year.
Whirlpool Stock Gains as Appliance Giant Beats Earnings Estimates
Whirlpool shares rose by more than 7% in late trading Monday after the appliance giant announced first-quarter earnings of $3.11 per share.
Elon Musk: All Tesla Cars Produced Now Are Capable of Full Self-Driving
Tesla's CEO and other executives described the EV maker's progress with self-driving technology at the company's Investor Day.