February 2022 options now available for Automatic Data Processing (ADP)
IInvestors in Automatic Data Processing Inc. (ticker: ADP) saw new options start trading today, with the February 2022 expiration. Stock option channel, our YieldBoost formula walked through the ADP options chain for new February 2022 contracts and identified a sale contract and a purchase contract of particular interest.
The contract to sell at the strike price of $ 245.00 has a current bid of $ 4.60. If an investor were to sell to open this sales contract, they agree to buy the stock at $ 245.00, but will also collect the premium, putting the base price of the shares at $ 240.40 (before broker commissions ). For an investor already interested in purchasing ADP shares, this could represent an attractive alternative to paying $ 246.32 / share today.
Since the strike price of $ 245.00 represents a discount of around 1% from the current share price (in other words, it’s out of the money by that percentage), it is also possible that the sales contract expires worthless. Current analytical data (including Greeks and Greeks implied) suggests that the current chance of this happening is 99%. Stock Options Channel will monitor these quotes over time to see how they evolve, posting a chart of these numbers on our website under contract detail page for this contract. If the contract expires worthless, the premium would represent a return of 1.88% on the cash commitment, or 15.94% annualized – at Stock Options Channel, we call that the YieldBoost.
Below is a chart showing Automatic Data Processing Inc.‘s past twelve months trading history, and highlighting in green the location of the $ 245.00 exercise against that history:
With respect to the options chain call options, the strike price call contract of $ 250.00 has a current bid of $ 3.60. If an investor were to buy ADP shares at the current price level of $ 246.32 / share, then sell to open that purchase contract as a “covered call”, they agree to sell the share at 250, $ 00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if applicable) of 2.96% if the stock was recalled at the February 2022 expiration (before broker commissions) . Of course, a lot of benefits could be left on the table if ADP shares really soar, which is why it becomes important to look at the past twelve months trading history of Automatic Data Processing Inc. , as well as to study the fundamentals of the company. Below is a chart showing ADP’s twelve month trading history, with the strike price of $ 250.00 highlighted in red:
Since the strike price of $ 250.00 represents a premium of around 1% over the current share price (in other words, it is out of the money by that percentage), it is It is also possible that the covered purchase contract will expire worthless, in which case the investor would keep both his shares and the premium received. Current analytical data (including Greeks and Greeks implied) suggests that the current chance of this happening is 99%. On our website under contract detail page for this contract, Stock Options Channel will track these quotes over time to see how they change and publish a chart of these numbers (the option contract’s trading history will also be plotted). If the covered purchase contract expires worthless, the premium would represent a 1.46% increase in the additional return to the investor, or 12.41% annualized, which we call the YieldBoost.
Meanwhile, we calculate the actual volatility of the past twelve months (taking into account the closing values of the last 252 trading days as well as today’s price of $ 246.32) at 19%. For more put and call option 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.