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Cognizant Options Trading Shows Potential Investor Opportunities

Cognizant Technology Solutions (CTSH) sees new options trading activity as investors may find attractive strategies with put and call contracts. With a put at $80 and a call at $85, potential returns can be significant for savvy investors.

Date: 
AI Rating:   7
Options Trading Review
The recent trading of options for Cognizant Technology Solutions Corp. (CTSH) can indicate several pathways that might affect stock prices. Currently, there are options expiring on May 16th, with highlighted put and call contracts. Investors can consider selling the $80 put option for a premium of 80 cents, which would create an effective purchase price of $79.20 per share if exercised. Given the current price of CTSH at $82.39, this represents a discount of approximately 3%, which is crucial for potential investors evaluating entry points. This put contract may benefit those looking for ways to acquire shares below market value.

The put contract also has a 63% chance of expiring worthless, suggesting that approximately 37% of the time, investors could indeed face purchasing the stock at that strike price. However, should it expire worthless, the premium collected would yield a 1.00% return on the cash commitment, or an annualized return of 5.22%.

On the options call side, there is the potential to sell a covered call at the $85 strike price, with a current offer of $1.30. If an investor were to buy the stock at $82.39 and sell this call, potential returns could be around 4.75% if the stock is called away at expiry. Given a similar 3% out-of-the-money status, the odds of this call expiring worthless are 55%. Thus, investors could keep their shares and the premium, representing a 1.58% return or an annualized 8.23%.

Overall, given the premium opportunities and the current trading figures, there are attractive prospects for options traders in CTSH, creating a tactical avenue for stock price considerations in the coming days. The implied volatility is estimated at 29%, while the actual trailing volatility stands at 20%, suggesting an average level of market fluctuation and speculative trading on CTA.
Stocks:  CTSH