First week of May 2022 Trading options for Redfin (RDFN)

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IInvestors in Redfin Corp (ticker: RDFN) saw new options become available this week, expiring in May 2022. One of the main data going into the price that an options buyer is willing to pay is the time value. So, with 172 days to expiration, the new contracts available represent a potential opportunity for put or call options sellers to earn a higher premium than they would. be available for contracts with an earlier expiration. AT Stock option channel, our YieldBoost formula walked the RDFN options chain for new contracts in May 2022 and identified a sell contract and a buy contract of particular interest.

The contract to sell at the strike price of $ 40.00 has a current bid of $ 6.60. If an investor were to sell to open that sales contract, they agree to buy the stock at $ 40.00, but will also collect the premium, putting the base price of the shares at $ 33.40 (before broker commissions ). For an investor already interested in purchasing RDFN shares, this could represent an attractive alternative to paying $ 40.52 / share today.

Since the strike price of $ 40.00 represents a discount of around 1% from the current share price (in other words, it is 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 60%. Stock Options Channel will be tracking 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 16.50% on the cash commitment, or 35.02% annualized – at Stock Options Channel, we call that the YieldBoost.

Below is a chart showing Redfin Corp’s past twelve month trading history and highlighting in green where the $ 40.00 strike price is against that history:

With respect to the options chain call options, the strike price call contract of $ 42.00 has a current bid of $ 6.40. If an investor were to buy RDFN shares at the current price level of $ 40.52 / share and then sell to open that purchase contract as a “covered call”, they agree to sell the shares at 42, $ 00. Since the call seller will also receive the premium, this would generate a total return (excluding dividends, if any) of 19.45% if the stock was recalled at the May 2022 expiration (before broker commissions. ). Of course, a lot of benefits could be left on the table if RDFN stocks really skyrocket, which is why it becomes important to look at Redfin Corp’s past twelve months trading history, as well as study. the fundamentals of the business. Below is a chart showing RDFN’s trading history over the past twelve months, with the $ 42.00 strike highlighted in red:

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Since the strike price of $ 42.00 represents a premium of around 4% 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 44%. 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 15.79% increase in additional return to the investor, or 33.53% annualized, which we call the YieldBoost.

The volatility implied in the sales contract example, as well as the purchase contract example, are both around 66%.

Meanwhile, we’re calculating the actual volatility for the past twelve months (taking into account the closing values ​​of the last 251 trading days as well as today’s price of $ 40.52) to be 65%. For more put and call option contract ideas worth considering, visit StockOptionsChannel.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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