IInvestors at Hut 8 Mining Corp (ticker: HUT) saw new options become available this week, for the May 20 expiry. AT Stock Options Channelour YieldBoost formula scanned the HUT options chain from top to bottom for new contracts on May 20 and identified one particularly attractive put and one call.
The $5.00 Strike Contract has a current bid of 48 cents. If an investor were to sell to open this put contract, they agree to buy the stock at $5.00, but will also collect the premium, placing the cost base of the stock at $4.52 (before brokerage commissions ). For an investor already interested in buying shares of HUT, this could be an attractive alternative to paying $5.99/share today.
Since the $5.00 strike represents a discount of approximately 17% off the current stock 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 implied Greeks) suggests that the current chance of this happening is 74%. Stock Options Channel will track these odds over time to see how they change, posting a table of these numbers on our website under contract detail page for this contract. If the contract expires worthless, the premium would represent a return of 9.60% on the cash commitment, or 62.57% annualized – at Stock Options Channel, we call this the Yield increase.
Below is a chart showing the past twelve month trading history for Hut 8 Mining Corp, and highlighting in green where the $5.00 strike falls in relation to that history:
On the call side of the options chain, the call contract at the $7.00 strike price has a current bid of 65 cents. If an investor were to buy HUT stock at the current price level of $5.99/share and then sell to open this call contract as a “covered call”, they are committing to selling the stock at 7 $.00. Assuming the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 27.71% if the stock is called at the May 20 expiry (before broker commissions) . Of course, a lot of upside could potentially be left on the table if HUT shares really spike, which is why it becomes important to look at Hut 8 Mining Corp’s trailing twelve-month trading history, as well as study the fundamentals of business. Below is a chart showing HUT’s trading history over the last twelve months, with the $7.00 strike highlighted in red:
Considering that the strike price of $7.00 represents a premium of approximately 17% to the current stock price (in other words, it is out of the price by that percentage), it It is also possible for the covered call contract to expire worthless, in which case the investor would keep both his shares and the premium collected. Current analytical data (including Greeks and implied Greeks) suggests that the current chance of this happening is 57%. On our website under contract detail page for this contract, Stock Options Channel will track these odds over time to see how they change and publish a chart of these numbers (the option contract’s trading history will also be charted). If the covered call contract expires worthless, the premium would represent a 10.85% incremental incremental return to the investor, or 70.73% annualized, what we call the Yield increase.
The implied volatility in the example sell contract is 110%, while the implied volatility in the example buy contract is 109%.
Meanwhile, we calculate the actual volatility for the last twelve months (considering the closing values of the last 253 trading days as well as today’s price of $5.99) at 106%. For more put and call options contract ideas worth considering, visit StockOptionsChannel.com.
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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