IInvestors in Grab Holdings Limited – Class A Ordinary Shares (ticker: GRAB) saw new options become available today, expiring May 20. At Stock Options Channel, our YieldBoost formula scoured the GRAB options channel for new contracts on May 20 and identified one put contract and one call contract of particular interest.
The put contract at the strike price of $2.50 has a current bid of 10 cents. If an investor were to sell to open this put contract, they are committing to buy the stock at $2.50, but will also collect the premium, which will put the base price of the stock at $2.40 (before brokerage fees). For an investor already interested in buying shares of GRAB, this could represent an attractive alternative to paying $3.22/share today.
Since the $2.50 strike price represents a discount of approximately 22% from the current stock price (in other words, it is out of play by that percentage), it is also possible that the contract of sale 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 4.00% on the cash commitment, or 22.12% annualized – at Stock Options Channel, we call this the Yield increase.
Below is a graph showing the past 12 months trading history for Grab Holdings Limited – Class A Common Shares, and highlighting in green where the $2.50 strike price falls versus to this history:
On the call side of the options chain, the call contract at the $5.00 strike price has a current bid of 15 cents. If an investor were to buy GRAB shares at the current price level of $3.22/share and then sell to open this call contract as a “covered call”, they are committing to selling the stock at 5 $.00. Assuming the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 59.94% 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 GRAB shares really soar, which is why it becomes important to review the past twelve months trading history for Grab Holdings Limited – Common Shares of category A, as well as studying business fundamentals. . Below is a chart showing GRAB’s trading history over the last twelve months, with the $5.00 strike highlighted in red:
Considering that the $5.00 strike price represents a premium of approximately 55% 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 a 4.66% increase in incremental return to the investor, or 25.76% annualized, what we call the Yield increase.
Meanwhile, we calculate that the actual volatility for the last twelve months (considering the closing values of the last 253 trading days as well as the current price of $3.22) is 82%. 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.