First week of September 16 Options trading for American Equity Investment Life Holding (AEL)
IInvestors at American Equity Investment Life Holding Co (Ticker: AEL) saw new options start trading this week, for September 16 expiry. To Stock Options Channelour YieldBoost formula scoured the AEL options chain for new contracts on September 16 and identified the next call contract of particular interest.
The call contract at the strike price of $35.00 has a current bid of 30 cents. If an investor were to buy shares of AEL at the current price level of $34.24/share and then sell to open this call contract as a “covered call”, they are committing to selling the stock. at $35.00. Since the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 3.10% if the stock is called at the September 16 expiry (before broker commissions ). Of course, a lot of upside could potentially be left on the table if AEL shares really soar, which is why it becomes important to look at American Equity Investment Life Holding’s past 12-month trading history. Co, as well as studying the fundamentals of the business. Below is a chart showing AEL’s trading history over the last twelve months, with the $35.00 strike highlighted in red:
Considering that the strike price of $35.00 represents a premium of approximately 2% 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 52%. On our website under contract detail page for this contract, Stock Options Channel will track these odds over time to see how they change and publish a chart of these numbers (the trading history of the option contract will also be charted). If the covered call contract expires worthless, the premium would represent an increase of 0.88% in incremental return to the investor, or 5.08% annualized, what we call the Yield increase.
The implied volatility in the example purchase contract above is 91%.
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 $34.24) is 37%. 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.