Investors in Bumble Inc (symbol: BMBL) saw new options trading today, with an expiration date of December 15. One of the most important data points that determine the price an option buyer is willing to pay is the time value. With 81 days until expiration, the new trading contracts thus represent a potential opportunity for sellers of puts or calls to capture a higher premium than would be available for shorter-term contracts. At Stock Options Channel, our YieldBoost formula has searched up and down the BMBL options chain for the December 15 new contracts and identified one put and one call contract of particular interest.
The put contract at the strike price of $12.50 has a current bid of 50 cents. If an investor were to sell that put contract to open, he would commit to buying the stock at $12.50, but he would also collect the premium, bringing the cost basis of the stock to $12.00 (before brokerage commissions). For an investor already interested in buying shares of BMBL, this could be an attractive alternative to paying $14.63/share today.
Because the $12.50 strike represents a roughly 15% discount to the stock’s current trading price (in other words, it’s out-of-the-money by that percentage), there’s also the possibility that the put contract expires worthless . Current analytical data (including the Greeks and the Implied Greeks) suggests that the current chance of this happening is 99%. Stock Options Channel will monitor these odds over time to see how they change, and publish a graph of these numbers on our website under the contract detail page for this contract. If the contract expires worthless, the premium would represent a 4.00% return on the cash obligation, or 18.02% annually. At Stock Options Channel we call this the Yield boost.
Below is a chart showing Bumble Inc’s twelve-month trading history and showing in green where the $12.50 strike is relative to that history:
Turning to the call side of the options chain, the call contract with the strike price of $15.00 has a current bid of $1.30. If an investor were to purchase shares of BMBL stock at the current price level of $14.63/share, and then sell that call contract to open as a ‘covered call’, he is committing to sell the shares at $15.00 . Since the call seller will also collect the premium, that would give a total return (excluding any dividends) of 11.41% if the shares are called away at maturity on December 15 (before broker commissions). Of course, a lot of potential could be left on the table if BMBL stock really rises. Therefore, it becomes important to look at Bumble Inc’s twelve-month trading history as well as its business fundamentals. Below is a chart showing BMBL’s twelve-month trading history with the $15.00 strike highlighted in red:
Considering that the $15.00 strike represents a roughly 3% premium to the stock’s current trading price (in other words, it’s out-of-the-money by that percentage), there’s also the possibility that the covered call contract expires worthless, in which case the investor would keep both his stock shares and the premium collected. The current analytical data (including the Greeks and the implied Greeks) suggests that the current probability of this happening is 47%. On our website under the contract detail page for this contract, Stock Options Channel will track these odds over time to see how they change and publish a graph of those numbers (the options contract’s trading history will also be charted). If the covered call contract expires worthless, the premium would mean an additional return increase of 8.89% for the investor, or 40.02% on an annual basis, which we estimate Yield boost.
The implied volatility in the call contract example above is 56%.
Meanwhile, we calculate the actual volatility over the next twelve months (considering the closing values of the past 250 trading days and the current price of $14.63) to be 53%. For more put and call option contract ideas worth checking out, visit StockOptionsChannel.com.
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