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New Options Trading in Elevance Health Inc Presents Opportunities

Investors eye new options trading for Elevance Health Inc (ELV) with potential for higher premiums on puts and calls. The time value of options could impact stock prices positively in the long run.

Date: 
AI Rating:   6

Options Trading Analysis

Elevance Health Inc (ELV) recently had new options contracts begin trading, including a put contract at a $400 strike price and a call contract at a $430 strike price. The attractiveness of these options could influence trading strategies and consequently impact stock prices.

The put contract allows investors to sell-to-open at a strike price of $400.00, with a current bid of $36.00. This setup offers a potential cost basis of $364.00, which is markedly lower than the current stock price of $406.12. The market perceives a 62% chance that this put contract will expire worthless. Should this occur, it represents a 9.00% return on the cash commitment, or an annualized return of approximately 7.90%. Such scenarios create advantageous conditions for potential buyers, possibly leading to an increased demand for the stock and a positive effect on stock prices.

On the flip side, the call contract, priced at a $430.00 strike, provides an opportunity for covered call selling. If an investor purchases shares at the current price and sells this call contract, they can see a potential total return of 15.73% if the stock is called away. The odds of this contract expiring worthless stand at 47%, allowing for the possibility of keeping both the shares and the premium. This could also serve to boost investor sentiment toward the stock, enhancing its appeal.

Considering the implied volatility for the put is 30% and for the call is 29%, while the trailing twelve-month actual volatility is 24%, it indicates relatively stable price expectations, implying that the stock price may not fluctuate dramatically in the near term. Stabilization in the stock may lead to more confident trading strategies among investors.

Stocks:  ELV