First week of August 20 Options trading for VMware

IInvestors in VMware Inc (ticker: VMW) saw new options become available this week, with the August 20 expiration. At Stock Options Channel, our YieldBoost formula scoured the VMW options chain for new August 20 contracts and identified a sell contract and a buy contract of particular interest.

The contract to sell at the strike price of $ 155.00 has a current bid of 85 cents. If an investor were to sell to open that sales contract, they agree to buy the stock at $ 155.00, but will also collect the premium, putting the base price of the shares at $ 154.15 (before broker commissions ). For an investor already interested in purchasing VMW shares, this could represent an attractive alternative to paying $ 156.36 / share today.

Since the strike price of $ 155.00 represents a discount of around 1% 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 64%. 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 a return of 0.55% on the cash commitment, or 66.72% annualized – at Stock Options Channel, we call that the YieldBoost.

Below is a chart showing VMware Inc’s past twelve months trading history and highlighting in green the location of the $ 155.00 exercise against that history:

As for the option chain calls, the contract to buy at the strike price of $ 160.00 has a current bid of 35 cents. If an investor were to buy shares of VMW at the current price level of $ 156.36 / share and then sell to open that purchase contract as a “covered call”, they agree to sell the share at 160 , $ 00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if any) of 2.55% if the stock is recalled on the August 20 expiration (before broker’s commissions). Of course, a lot of benefits could be left on the table if VMW stocks really skyrocket, which is why it becomes important to look at VMware Inc’s past twelve month trading history, as well as study. the fundamentals of the business. Below is a chart showing VMW’s trading history over the past twelve months, with the strike price of $ 160.00 highlighted in red:

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Since the strike price of $ 160.00 represents a premium of around 2% over the current share price (in other words, it is out of the money by that percentage), it is It is also possible that the covered purchase contract will expire worthless, in which case the investor would keep both his shares and the premium received. Current analytical data (including Greeks and Greeks implied) suggests that the current chance of this happening is 82%. On our website, under the contract detail page for that contract, the Stock Options Channel will track these quotes over time to see how they change and publish a chart of those numbers (the option contract’s trading history will be also plotted). If the covered purchase contract expires worthless, the premium would represent an increase of 0.22% in the additional return to the investor, or 27.23% on an annualized basis, which we call the YieldBoost.

The implied volatility in the sales contract example is 28%, while the implied volatility in the sales contract example is 32%.

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 $ 156.36) at 28%. 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.


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