First Week of July 20th Options Trading For ARMOUR Residential REIT (ARR)

Investors in ARMOUR Residential REIT Inc. (ARR) saw new options become available this week, for the July 20th 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 198 days until expiration the newly available contracts represent a possible 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 ARR options chain for the new July 20th contracts and identified the following put contract of particular interest.

The put contract at the $25.00 strike price has a current bid of 90 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $25.00, but will also collect the premium, putting the cost basis of the shares at $24.10 (before broker commissions). To an investor already interested in purchasing shares of ARR, that could represent an attractive alternative to paying $25.63/share today.

Because the $25.00 strike represents an approximate 2% 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 51%. 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 3.60% return on the cash commitment, or 6.64% annualized — at Stock Options Channel we call this the YieldBoost.

START SLIDESHOW:
Top YieldBoost Puts of the Mortgage REITs »

Below is a chart showing the trailing twelve month trading history for ARMOUR Residential REIT Inc., and highlighting in green where the $25.00 strike is located relative to that history:

Loading+chart++2018+TickerTech.com

The implied volatility in the put contract example above is 25%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 253 trading day closing values as well as today's price of $25.63) to be 16%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.

More from Stocks

Everything You Need to Know About Closed-End Funds to Boost Your Portfolio

Everything You Need to Know About Closed-End Funds to Boost Your Portfolio

Tilray and Other Cannabis Firms Have Even More Catalysts on the Horizon

Tilray and Other Cannabis Firms Have Even More Catalysts on the Horizon

Was Tilray's Wild Day Sign of a Market Top?

Was Tilray's Wild Day Sign of a Market Top?

Dow Ends Higher on Possible Trade Thaw; Tilray Up Sharply

Dow Ends Higher on Possible Trade Thaw; Tilray Up Sharply

Tilray Shares Are Going Absolutely Haywire -- Here's Why

Tilray Shares Are Going Absolutely Haywire -- Here's Why