Unlocking Opportunities in Options Trading
As investors gear up for the first week of July, the world of options trading is ablaze with activity surrounding Amazon.com Inc (Symbol: AMZN). With the introduction of new options set to expire on July 19th, traders are paying close attention to the potential these contracts hold.
The Time Value Conundrum
One crucial factor influencing the price of an option is the time value. With 102 days left until the expiration date, these fresh contracts offer sellers of puts or calls a chance to fetch a premium higher than contracts nearing expiration. This allure stems from the prospect of increased time value embedded in these new July 19th contracts.
Exploration of Put Contracts
The put contract set at the $185.00 strike marks an enticing proposition with a current bid of $9.95. By opting to sell-to-open this put contract, an investor commits to purchasing the stock at $185.00 while simultaneously pocketing the premium. This move effectively lowers the cost basis of the shares to $175.05—a tantalizing alternative to the current market price of $186.09.
Delving into Call Contracts
On the calls side, the $190.00 strike call contract presents a captivating option with a bid of $11.40. Investors considering a covered call strategy would sell-to-open this contract, agreeing to sell the stock at $190.00. This move, coupled with collecting the premium, could yield a return of 8.23% if the stock is called away at expiration. Though potential gains are capped, the strategy warrants attention, especially given the strong historical performance of Amazon.com Inc.
Analyzing Risk and Reward
Both the put and call contracts offer varying degrees of risk and reward. The $185.00 put contract is approximately 1% below the current stock price, indicating a 59% chance of expiring worthless. In contrast, the $190.00 call contract presents a 2% premium, with a 48% chance of expiring without value. These odds will be diligently monitored by Stock Options Channel, providing investors with valuable insights over time.
Comparing Volatility
The put contract boasts an implied volatility of 31%, with the call contract slightly lower at 30%. In comparison, the trailing twelve-month volatility, calculated at 29%, sheds light on the stock’s historical price movements. Navigating these fluctuations is key for investors seeking to capitalize on options trading.
Conclusion
As July commences, the options market for Amazon.com Inc brims with potential for astute traders. By carefully examining the opportunities presented by these new contracts, investors can craft strategies to harness the inherent volatility of AMZN shares. The journey ahead promises excitement, challenges, and, above all, the prospect of lucrative returns.