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First week of SYF options trading March 2023


IInvestors at Synchrony Financial (Ticker: SYF) saw new options start trading this week, for March 2023 expiry. One of the key data points that goes into the price an option buyer is willing to pay is the time value, so with 245 days to expiration, new trade contracts represent a potential opportunity for sellers of puts or calls to obtain a higher premium than would be available for contracts whose expiration is nearer. At Stock Options Channel, our YieldBoost formula scoured the SYF options channel for March 2023 new contracts and identified one put contract and one call contract of particular interest.

The put contract at the strike price of $30.00 has a current bid of $3.70. If an investor were to sell to open this put contract, they agree to buy the stock at $30.00, but will also collect the premium, placing the cost base of the stock at $26.30 (before brokerage commissions ). For an investor already interested in buying shares of SYF, this could represent an attractive alternative to paying $31.13/share today.

Since the $30.00 strike represents about a 4% discount to the current stock price (in other words, it’s out of the money by that percentage), it’s 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 62%. 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 12.33% on the cash commitment, or 18.37% annualized – at Stock Options Channel, we call this the Yield increase.

Below is a graph showing the last twelve months trading history for Synchrony Financial, and highlighting in green where the strike price of $30.00 falls in relation to this history:

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On the call side of the options chain, the call contract at the strike price of $32.00 has a current bid of $3.80. If an investor were to buy SYF stock at the current price level of $31.13/share and then sell to open this call contract as a “covered call”, they are committing to sell the stock at 32 $.00. Assuming that the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 15.00% if the stock is called at the March 2023 expiry (before brokerage commissions). Of course, a lot of upside could potentially be left on the table if SYF shares really soar, which is why it becomes important to look at the past twelve months trading history for Synchrony Financial, as well as study the fundamentals of business. Below is a chart showing SYF’s past twelve month trading history, with the $32.00 strike highlighted in red:

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Considering that the strike price of $32.00 represents a premium of approximately 3% 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 47%. 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 12.21% increase in incremental return to the investor, or 18.19% annualized, what we call the Yield increase.

The implied volatility in the example sell contract is 50%, while the implied volatility in the example buy contract is 41%.

Meanwhile, we calculate that the actual volatility for the last twelve months (considering the closing values ​​for the last 252 trading days as well as today’s price of $31.13) is 40%. For more put and call options 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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