IInvestors in iShares Trust – iShares Short Treasury Bond ETF (Symbol: SHV) saw new options become available today, for June 2023 expiry. One of the main entries that go into the price that a buyer option is willing to pay is the time value, so with 359 days to expiration, newly available contracts represent a possible opportunity for put or call sellers to earn a higher premium than is currently available. would be available for contracts with closer expiration. At Stock Options Channel, our YieldBoost formula scoured the SHV options channel for June 2023 new contracts and identified the next call contract of particular interest.
The call contract at the strike price of $112.00 has a current bid of 45 cents. If an investor were to buy SHV stock at the current price level of $110.05/share and then sell to open this call contract as a “covered call”, they are committing to selling the stock at 112 $.00. Assuming the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 2.18% if the stock is canceled at the June 2023 expiry (before brokerage commissions). Of course, a lot of upside could potentially be left on the table if SHV shares really soar, which is why it becomes important to look at the past twelve months trading history for iShares Trust – iShares Short Treasury Bond ETFs, as well as studying the fundamentals of the business. . Below is a chart showing SHV’s trading history over the last twelve months, with the $112.00 strike highlighted in red:
Considering that the strike price of $112.00 represents a premium of approximately 2% 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 99%. On our website, under the contract detail page for that contract, the Stock Options Channel will track those odds over time to see how they change and publish a table of those numbers (the option contract’s trading history will be also plotted). If the covered call expires worthless, the premium would represent an increase of 0.41% in incremental return to the investor, or 0.42% annualized, what we call the Yield increase.
The implied volatility in the example call contract above is 10%.
During this time, we calculate that the actual volatility of the last twelve months (taking into account the closing values of the last 252 trading days as well as the current price of $110.05) is 0%. For more put and call options contract ideas worth considering, visit StockOptionsChannel.com.
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