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Nokia investors started trading with new options30. 03. 2023 Thursday / By: Robert Denes / Business / Exact time: BST / Print this page
N okia investors started trading with new options today, for the May 12 expiration. In the equity options channel, our YieldBoost formula looked up and down the NOK options chain for the new May 12 contracts and identified one put and one call of particular interest.
The current bid for the put contract with a strike price of $4.50 is 7 cents. If an investor were to sell the put contract, they would agree to buy the stock for $4.50, but also collect the premium, so the cost basis of the stock is $4.43 (before brokerage commissions). For an investor already interested in buying NOK shares, this could be an attractive alternative to paying $4.84/share today.
Since the $4.50 strike is roughly a 7% discount to the stock's current trading price (in other words, it's that much short), there's also the possibility that the put contract will expire worthless. Current analytics (including Greeks and implied Greeks) suggest that the current chance of this is 99%. Stock Options Channel will track these odds over time to see how they change and will post a chart of these numbers on our website on the contract detail page . If the contract expires worthless, the premium is a 1.56% return on the cash commitment, or 13.20% annualized – in the stock option channel we call this YieldBoost.
Turning to the call side of the options chain, the current bid for a call contract with a strike price of $5.00 is 12 cents. If an investor were to buy shares of NOK at the current price of $4.84/share and then sell the call contract as a "covered call," they would be selling the stock at $5.00. Given that the call seller also collects the premium, this results in a total return (if any without dividends) of 5.79% if the stock is called at expiration on May 12 (before the broker's commission). Of course, there is a lot of upside left on the table if NOK shares really soar, which is why it becomes important to look at Nokia Corp.'s 12-month trading history and study its business fundamentals.
Considering the fact that the $5.00 strike represents approximately a 3% premium to the stock's current trading price (in other words, it's sold out by that much), there is also the possibility that the covered call contract will expire worthless, in this in this case, the investor would keep both his shares and the collected premium.Via Link