Investors in Gold Fields Ltd. (Symbol: GFI) saw new options become available today, for the November 15th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the GFI options chain for the new November 15th contracts and identified one put and one call contract of particular interest.
The put contract at the $5.00 strike price has a current bid of 22 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $5.00, but will also collect the premium, putting the cost basis of the shares at $4.78 (before broker commissions). To an investor already interested in purchasing shares of GFI, that could represent an attractive alternative to paying $5.19/share today.
Because the .28% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Gold Fields Ltd., and highlighting in green where the $5.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $6.00 strike price has a current bid of 5 cents. If an investor was to purchase shares of GFI stock at the current price level of $5.19/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $6.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 16.57% if the stock gets called away at the November 15th $6.00 strike highlighted in red:
Considering the fact that the $6.00.96% boost of extra return to the investor, or 6.63% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 64%, while the implied volatility in the call contract example is 72%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 250 trading day closing values as well as today's price of $5.19) to be 48%..