Options with an expiration date of November 10th have been released by Lumber Liquidators Holdings Inc (NYSE:$LL). The put contract currently sits at $37.00 strike with a current bid of $1.15. A commitment of $37.00 is required to sell-to-open the put contract but will result in a premium of $35.85. This could be a big incentive for potential investors unwilling to pay the current stock price.
There is also the possibility that the option might expire worthless since the $37.00 strike is approximately 3% below the current trade price. There is a 60% chance of this according to analytical data. Despite the risk, the premium would still represent a 3.11% return on the cash commitment, annualized at 26.36%, even if the contract expires worthless.
Those looking into the calls side will see that the call contract sits at $39.99 strike price and currently has a bid of $1.15. The sell-to-open would be considered ‘covered call’ if an investor purchased the stock at the current price of $38.15 per share.
One could expect 5.24% if the stock gets called away November 10th when considering the premium. This could result in a lot of lost profit if the shares take a strong upswing.
The trailing-twelve-month volatility, using trade data for the last 252 days and the current price of $38.15, works out to be 56%
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