First week of trading in KKR options June 2022

IInvestors in KKR & CO Inc (ticker: KKR) saw new options start trading this week, for the June 2022 expiration. One of the key data points that goes into the price that a buyer can The option is ready to pay, is the time value, so with 245 days to expiration, new trading contracts represent a possible opportunity for put or call sellers to obtain a higher premium than would be available to them. contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula scoured the KKR options chain for new June 2022 contracts and identified a put and call of particular interest.

The contract to sell at the strike price of $ 65.00 has a current bid of $ 5.50. If an investor were to sell to open that sales contract, they agree to buy the share at $ 65.00, but will also receive the premium, bringing the base price of the shares to $ 59.50 (before commissions broker). For an investor already interested in purchasing KKR shares, this could represent an attractive alternative to paying $ 66.45 / share today.

Since the $ 65 strike price represents a discount of around 2% from the current share price (in other words, it’s out of the money by that percentage), it’s also possible that the sales contract expires without value. Current analytical data (including Greeks and Greeks implied) suggests that the current chance of this happening is 58%. 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 8.46% return on the cash commitment, or 12.61% annualized – at Stock Options Channel, we call that the YieldBoost.

Below is a chart showing KKR & CO Inc’s past twelve month trading history, and highlighting in green the location of the $ 65.00 exercise against that history:

As for the option chain calls, the contract to buy at the strike price of $ 70.00 has a current bid of $ 4.60. If an investor were to buy KKR shares at the current price level of $ 66.45 / share and then sell to open that purchase contract as a “covered call”, they agree to sell the share at $ 70.00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if any) of 12.26% if the stock is recalled at the June 2022 expiration (before broker commissions) . Of course, a lot of benefits could be left on the table if KKR shares really soar, which is why it becomes important to look at the last twelve months trading history of KKR & CO Inc, as well as ” study the fundamentals of the business. Below is a chart showing KKR’s trading history over the past twelve months, with the strike price of $ 70.00 highlighted in red:

Since the strike price of $ 70.00 represents a premium of around 5% 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 56%. 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 a 6.92% increase in additional return to the investor, or 10.31% on an annual basis, which we call the YieldBoost.

The implied volatility in the sales contract example is 31%, while the implied volatility in the sales contract example is 30%.

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 $ 66.45) at 25%. 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.