Latest News: Technology |  Celebrity |  Movies |  Apple |  Cars |  Business |  Sports |  TV Shows |  Geek

Trending

Filed under: News

 

Interesting JWN Put And Call Options For February 2014

Dec 23 2013, 12:56pm CST | by

Interesting JWN Put And Call Options For February 2014

Photo Credit: Forbes
 
 

Investors in Nordstrom, Inc. (NYSE: JWN) saw new options become available today, for the February 2014 expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the JWN options chain for the new February 2014 contracts and identified one put and one call contract of particular interest.

The put contract at the $60.00 strike price has a current bid of $1.42. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $60.00, but will also collect the premium, putting the cost basis of the shares at $58.58 (before broker commissions). To an investor already interested in purchasing shares of JWN, that could represent an attractive alternative to paying $61.61/share today.

Because the $60.00 strike represents an approximate 3% 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 63%. 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 2.37% return on the cash commitment, or 14.16% annualized — at Stock Options Channel we call this the YieldBoost.

Click here to find out the Top YieldBoost Puts of the S&P 500 »

Below is a chart showing the trailing twelve month trading history for Nordstrom, Inc., and highlighting in green where the $60.00 strike is located relative to that history:

Turning to the calls side of the option chain, the call contract at the $62.50 strike price has a current bid of $1.69. If an investor was to purchase shares of JWN stock at the current price level of $61.61/share, and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $62.50. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 4.19% if the stock gets called away at the February 2014 expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if JWN shares really soar, which is why looking at the trailing twelve month trading history for Nordstrom, Inc., as well as studying the business fundamentals becomes important. Below is a chart showing JWN’s trailing twelve month trading history, with the $62.50 strike highlighted in red:

Considering the fact that the $62.50 strike represents an approximate 1% 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 56%. 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 2.74% boost of extra return to the investor, or 16.41% annualized, which we refer to as the YieldBoost.

Click here to find out the Top YieldBoost Calls of the S&P 500 »

The implied volatility in the put contract example is 21%, while the implied volatility in the call contract example is 22%. Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $61.61) to be 18%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.

Source: Forbes

iPad Air Giveaway. Win a free iPad Air.

You Might Also Like

Updates

Shopping Deals

 
 
 

<a href="/latest_stories/all/all/31" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

 

Comments

blog comments powered by Disqus

Latest stories

Leaked iPhone 6 manual shows brand new design
Leaked iPhone 6 manual shows brand new design
The card shows a diagram of all buttons on the Apple iPhone 6
 
 
iPhone 6 &#039;Phosphorus&#039; Component Likely a Barometric Pressure Sensor
iPhone 6 'Phosphorus' Component Likely a Barometric Pressure Sensor
The iPhone 6 has been rumored to include a number of new environmental sensors such as an atmospheric pressure sensor.
 
 
Deion Sanders' School Opens Despite Losing Charter
Deion Sanders' School Opens Despite Losing Charter
Pro Football Hall of Famer Deion Sanders' Prime Prep Academy in Fort Worth, Tex. opened this week despite its location -- in a shopping center across an adult shop -- being disapproved and losing its charter.
 
 
Google sets up a giant Google Maps search terminal in Shibuya
Google sets up a giant Google Maps search terminal in Shibuya
The main goal here is obviously to promote tourism. It also gives the tech giant an opportunity to promote its products, particularly Google Maps.
 
 
 

About the Geek Mind

The “geek mind” is concerned with more than just the latest iPhone rumors, or which company will win the gaming console wars. I4U is concerned with more than just the latest photo shoot or other celebrity gossip.

The “geek mind” is concerned with life, in all its different forms and facets. The geek mind wants to know about societal and financial issues, both abroad and at home. If a Fortune 500 decides to raise their minimum wage, or any high priority news, the geek mind wants to know. The geek mind wants to know the top teams in the National Football League, or who’s likely to win the NBA Finals this coming year. The geek mind wants to know who the hottest new models are, or whether the newest blockbuster movie is worth seeing. The geek mind wants to know. The geek mind wants—needs—knowledge.

Read more about The Geek Mind.