New Options for ONEOK Present Potential Investment Opportunities

A recent report highlights new options trading for ONEOK Inc., pointing to attractive investment opportunities through put and call contracts. Investors could see promising returns, with potential implications on stock performance as the options near expiration in January 2027.

Date: 16-09-2024

AI Rating: 7

The report discusses the initiation of new options trading for ONEOK Inc. (OKE), particularly focusing on January 2027 contracts. The time value associated with these options could lead to higher premiums for put and call options compared to contracts with shorter expiration dates.

The put contract at the $87.50 strike price, currently with a bid of $8.60, indicates that investors can commit to purchasing shares at a discounted rate of $87.50, which is approximately 6% lower than the current trading price of $93.15. This strategy may appeal to investors seeking a cost-effective entry point, resulting in an effective cost basis of $78.90. Should this put expire worthless, the premium would yield a 9.83% return on the cash commitment, equivalent to 4.22% annualized.

On the call side, the $95.00 strike price call contract with a bid of $8.30 presents another opportunity. If an investor buys OKE at the current price and sells this covered call, they could achieve a total return of 10.90% if the stock is called away at expiration. Since this strike price is only 2% above the current stock price, the odds of it potentially expiring worthless are 44%, allowing the investor to retain both the stock and the premium. If so, this would provide an 8.91% return or 3.82% annualized.

Additionally, the report highlights some important metrics, including the implied volatilities of the put and call contracts at 28% and 21%, respectively, against the actual trailing twelve-month volatility of 19%. Overall, the opportunities presented by these options trading strategies could positively impact investor sentiment for OKE, though the actual outcome will depend on market dynamics as the expiration approaches.

Stocks: OKE