October 21 options now available for Johnson Controls International (JCI)
IInvestors at Johnson Controls International plc (Ticker: JCI) saw new options become available today, for the October 21 expiry. One of the main inputs that goes into the price an option buyer is willing to pay is time value, so with 246 days to expiration, newly available contracts represent a potential opportunity for sellers to puts or calls to obtain a higher premium than would be available for contracts with closer expiration. At Stock Options Channel, our YieldBoost formula scoured the JCI Options Channel for new contracts on October 21 and identified one put contract and one call contract of particular interest.
The contract to sell at the strike price of $65.00 has a current bid of $4.60. If an investor were to sell to open this put contract, they agree to buy the stock at $65.00, but will also collect the premium, placing the cost base of the stock at $60.40 (before brokerage commissions ). For an investor already interested in buying JCI stock, this could be an attractive alternative to paying $66.53/share today.
Since the $65.00 strike price represents about a 2% discount to 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 99%. Stock Options Channel will track these odds over time to see how they change, by posting a table 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 7.08% on the cash commitment, or 10.50% annualized – at Stock Options Channel, we call this the Yield increase.
Below is a chart showing the past twelve month trading history for Johnson Controls International plc, and highlighting in green where the $65.00 strike falls in relation to that history:
On the call side of the options chain, the call contract at the strike price of $67.50 has a current bid of $4.60. If an investor were to buy JCI shares at the current price level of $66.53/share and then sell to open this purchase contract as a “covered call”, they are committing to selling the stock at 67 $.50. Assuming that the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 8.37% if the stock is called at the October 21 expiry (before brokerage commissions). Of course, a lot of upside could potentially be left on the table if JCI shares really soar, which is why it’s important to look at Johnson Controls International plc’s past 12-month trading history, as well as study the fundamentals of business. Below is a chart showing JCI’s trading history for the last twelve months, with the strike price of $67.50 highlighted in red:
Given that the strike price of $67.50 represents a premium of approximately 1% 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 contract expires worthless, the premium would represent a 6.91% incremental incremental return to the investor, or 10.26% annualized, what we call the Yield increase.
Meanwhile, we calculate that the actual volatility for the last twelve months (considering the closing values for the last 254 trading days as well as today’s price of $66.53) is 22%. 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.