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Commit To Purchase Compass At $5, Earn 67.2% Annualized Using Options
Thursday, December 21, 2:10 PM ET, by Market News Video Staff

Investors considering a purchase of Compass Inc (COMP) shares, but cautious about paying the going ...

Commit To Purchase Compass At $7, Earn 66.8% Annualized Using Options
Friday, March 22, 11:36 AM ET, by Market News Video Staff

Investors eyeing a purchase of Compass Inc (COMP) stock, but cautious about paying the going ...

Commit To Purchase Compass At $7, Earn 66.8% Annualized Using Options

By Market News Video Staff, Friday, March 22, 11:36 AM ET
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Investors eyeing a purchase of Compass Inc (NYSE:COMP) stock, but cautious about paying the going market price of $16405.00/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the December put at the $7 strike, which has a bid at the time of this writing of $3.50. Collecting that bid as the premium represents a 50% return against the $7 commitment, or a 66.8% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

Selling a put does not give an investor access to COMP's upside potential the way owning shares would, because the put seller only ends up owning shares in the scenario where the contract is exercised. And the person on the other side of the contract would only benefit from exercising at the $7 strike if doing so produced a better outcome than selling at the going market price. (Do options carry counterparty risk? This and six other common options myths debunked). So unless Compass Inc sees its shares decline 100% and the contract is exercised (resulting in a cost basis of $3.50 per share before broker commissions, subtracting the $3.50 from $7), the only upside to the put seller is from collecting that premium for the 66.8% annualized rate of return.

Below is a chart showing the trailing twelve month trading history for Compass Inc, and highlighting in green where the $7 strike is located relative to that history:

The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the December put at the $7 strike for the 66.8% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for Compass Inc (considering the last 365 trading day closing values as well as today's price of $16405.00) to be 8796%. For other put options contract ideas at the various different available expirations, visit the COMP Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Friday, the put volume among S&P 500 components was 957,516 contracts, with call volume at 1.18M, for a put:call ratio of 0.81 so far for the day, which is unusually high compared to the long-term median put:call ratio of .65. In other words, there are lots more put buyers out there in options trading so far today than would normally be seen, as compared to call buyers. Find out which 15 call and put options traders are talking about today.


This Article's Word Cloud:   COMP   Compass   December   Options   Stock   YieldBoost   about   among   annualized   benefit   buyers   call   chart   compared   considering   contract   exercised   fillColor   from   going   history   market   month   only   options   other   owning   premium   price   rate   ratio   represents   return   seller   selling   share   shares   stock   strike   than   that   there   this   today   trading   trailing   twelve   upside   which   would
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Commit To Purchase Compass At $7, Earn 66.8% Annualized Using Options | Market News Video | Copyright © 2008 - 2024, All Rights Reserved

Any ideas and opinions presented in all Market News Video clips are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All viewers agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

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