November 29 Options now available for Hess

Investors in Hess Corp (Symbol: HES) saw new options begin trading today with an expiration date of November 29th. At Stock Options Channel, our YieldBoost formula scanned the HES options chain for the new November 29th contracts and identified a put and a call contract of particular interest.

The put contract at the strike price of $139.00 has a current bid of $2.85. If an investor were to sell this put contract to open it, they would be committing to buying the stock at $139.00 but would also receive the premium, bringing the shares' cost basis to $136.15 (before broker commissions). For an investor already interested in purchasing HES stock, this could represent an attractive alternative to paying $139.87/share today.

Since the $139.00 strike price represents a discount of approximately 1% to the stock's current trading price (in other words, it is out of the money by that percentage), there is also the possibility that the put contract could expire worthless. The current analytical data (including Greek and implied Greek data) suggests that the probability of this happening is currently 55%. Stock Options Channel tracks these odds over time to see how they change and posts a chart of these numbers on our website on the contract detail page for that contract. Should the contract expire worthless, the premium would equate to a return of 2.05% on the cash commitment or 14.96% annualized – at Stock Options Channel we call this the YieldBoost.

Below is a chart showing the last twelve month trading history for Hess Corp, highlighting in green where the strike price of $139.00 is relative to that history:

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As for the call side of the options chain, the call contract at the strike price of $143.00 has a current bid of $3.30. If an investor were to purchase HES stock at the current price level of $139.87/share and then sell this call contract as a covered call at the open, they are committing to selling the stock for $143.00. Considering that the call seller also collects the premium, this would result in a total return (excluding any dividends) of 4.60% if the stock is called on November 29th (before brokerage commissions). Of course, there could potentially still be a lot of upside if HES stock really soars, which is why it's important to look at the trailing twelve-month trading history for Hess Corp and delve into the business fundamentals. Below is a chart showing HES's trading history over the last twelve months, with the strike price of $143.00 highlighted in red:

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Considering that the $143.00 strike price represents a premium of approximately 2% to the stock's current trading price (in other words, it is out of the money by that percentage), there is also a possibility that the covered call -Contract doing so would expire and become worthless; in this case, the investor would keep both his shares and the premium collected. The current analytical data (including Greek and implied Greek data) suggests that the probability of this happening is currently 56%. On our website under the contract details page for that contract, Stock Options Channel tracks these odds over time to see how they change and publishes a chart of these numbers (the trading history of the options contract is also recorded). Should the covered call contract expire worthless, the premium would represent an increase in additional return to the investor of 2.36% or 17.21% on an annual basis, which we refer to as “…” YieldBoost.

The implied volatility in the put contract example is 25%, while the implied volatility in the call contract example is 29%.

Meanwhile, we calculate the actual volatility over the last twelve months (taking into account the closing values of the last 251 trading days and today's price of $139.87) at 25%. For more worth-watching put and call options contract ideas, visit StockOptionsChannel.com.

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