Cognizant’s New Options Point to Investment Opportunities

Cognizant Technology Solutions sees new options trading. Investors might find attractive opportunities with put and call contracts, indicating potential stock price movements in the future.

Date: 28-01-2025

AI Rating: 6

Investment Opportunities from Options Trading
The report discusses new options for Cognizant Technology Solutions Corp. (CTSH) and implies potential price fluctuations. The newly initiated contracts provide key investment opportunities due to their longer time until expiration (416 days).

The analysis indicates that the put contract at the $80.00 strike price shows a current bid of $4.50. If sold, this put could allow an investor to acquire shares at an effective cost basis of $75.50. This demonstrates a practical way to minimize the purchase cost below the current trading price of $80.88, which is insightful for investors considering entry points.

Moreover, with the put representing only a 1% discount from the current trading price, it is currently out-of-the-money by that percentage. However, there is a notable possibility (61%) that the put contract may expire worthless, which, if it happens, would yield a 5.62% return on the cash commitment—a relatively attractive figure.

The call contract at the $85.00 strike price, with a current bid of $5.10, suggests a potential total return of 11.40% if the stock is called away at expiration. While this contract also has a possibility of expiring worthless (48% odds), keeping both the shares and premiums could signify profitable trading strategies.

Implied Volatility and Trading History
The implied volatility for the put contract is noted at 26%, while for the call, it is 24%, both of which are higher than the trailing twelve-month volatility of 20%. This discrepancy might indicate that investors expect more significant price swings in the near future compared to the historical average.

Overall, the report suggests practical investment strategies through options trading, especially for those ready to navigate potential upsides and consider the associated risks.

Stocks: CTSH