New Options for Magna International Inc May Impact Stock Value

A report outlines new options for Magna International Inc that could present unique investment opportunities. Investors might benefit from favorable contract terms, affecting stock price projections positively.

Date: 16-09-2024

AI Rating: 7

The report discusses the introduction of new options for Magna International Inc (MGA), focusing on contracts that expire in January 2027. With 851 days until expiration, the time value allows for potentially higher premiums for sellers of puts or calls.

For the put contract at a $37.50 strike price, which is currently bid at $4.50, the scenario allows the buyer to purchase the stock at a lower effective price of $33.00. This represents a 6% discount from the current stock price at $40.02, potentially appealing for investors seeking to enter at a low basis while collecting the premium.

The odds of the put contract expiring worthless are estimated at 66%. If the contract does expire worthless, the premium would yield a 12% return on the cash committed, or 5.15% annualized.

Regarding calls, the contract at a $42.50 strike price could yield a total return of 17.44% if the stock is called away at the January 2027 expiration. This strike price presents a 6% premium to the current stock price, and the likelihood of this call contract expiring worthless is projected at 43%, allowing investors to retain both the shares and the premium collected which would provide an 11.24% return, or 4.82% annualized.

Implied volatility for entry options is noted at 39% for puts and 36% for calls; however, the actual trailing twelve-month volatility is lower at 30%. This suggests that current pricing could be fairly volatile, with opportunities for yield enhancement through options trading.

Stocks: MGA