INovoCure Ltd (ticker: NVCR) investors saw new options start trading today, for February 2023 expiry. One of the main entries that go into the price an option buyer is ready to pay is time value, so with 203 days to expiration, new trade contracts represent a possible opportunity for put or call sellers to earn a higher premium than would be available for contracts with shorter expiration dates. At Stock Options Channel, our YieldBoost formula scoured the NVCR options channel for new February 2023 contracts and identified a put contract and a call contract of particular interest.
The contract to sell at the strike price of $65.00 has a current bid of $16.90. 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 $48.10 (before brokerage commissions ). For an investor already interested in buying shares of NVCR, this could represent an attractive alternative to paying $67.76/share today.
Since the strike price of $65.00 represents a discount of approximately 4% 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 26.00% on the cash commitment, or 46.74% annualized – at Stock Options Channel, we call this the Yield increase.
Below is a chart showing NovoCure Ltd’s last 12 months trading history, 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 $70.00 has a current bid of $18.70. If an investor were to buy NVCR stock at the current price level of $67.76/share and then sell to open this call contract as a “covered call”, they are committing to selling the stock at 70 $.00. Since the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 30.90% if the stock is canceled at the February 2023 expiry (before brokerage commissions) . Of course, a lot of upside could potentially be left on the table if NVCR shares really soar, which is why it becomes important to look at NovoCure Ltd’s trading history for the last twelve months, as well as to study the fundamentals of the business. Below is a chart showing NVCR’s trading history over the past twelve months, with the $70.00 strike highlighted in red:
Considering that the strike price of $70.00 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 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 27.60% incremental incremental return to the investor, or 49.61% 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 252 trading days as well as today’s price of $67.76) is 65%. 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.