IInvestors in Apollo Commercial Real Estate Finance Inc. (ticker: ARI) saw new options start trading this week, for the May 2022 expiration. One of the main data entering the price that a buyer has of options is willing to pay is the time value. So, with 239 days left to expire, new trading contracts represent a potential opportunity for put or call options sellers to earn a higher premium than they would. be available for short-term contracts. At Stock Options Channel, our YieldBoost formula took a top-down review of the ARI options chain for new contracts from May 2022 and identified the following sales contract of particular interest.
The contract to sell at the strike price of $ 15.00 has a current bid of $ 1.25. If an investor were to sell to open this sales contract, they agree to buy the stock at $ 15.00, but will also collect the premium, putting the base price of the stock at $ 13.75 (before broker commissions ). For an investor already interested in buying ARI shares, this could represent an attractive alternative to paying $ 15.29 / share today.
Since the strike price of $ 15.00 represents a discount of around 2% from the current share price (in other words, it is out of the money by that percentage), it is also possible that the sales contract expires worthless. Current analytical data (including Greeks and Greeks implied) suggests that the current chance of this happening is 53%. The Stock Options Channel will monitor these quotes over time to see how they evolve, posting a chart of these numbers on our website under the contract detail page for that contract. If the contract expires worthless, the premium would represent an 8.33% return on the cash commitment, or 12.73% annualized – at Stock Options Channel we call that the YieldBoost.
Below is a chart showing the last twelve months trading history of Apollo Commercial Real Estate Finance Inc., and highlighting in green the location of the $ 15.00 strike against that history:
The volatility implied in the sales contract example above is 43%.
Meanwhile, we calculate the actual volatility of the past twelve months (taking into account the closing values of the last 252 trading days as well as today’s price of $ 15.29) at 36%. For more put and call option contract ideas worth considering, visit StockOptionsChannel.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.