New Options Trading Brings Opportunities for Royal Bank Investors

A report reveals that new options for Royal Bank of Canada are being traded with potential premium opportunities for investors. With strategic put and call options available, investors may find attractive alternatives that could affect stock prices.

Date: 16-09-2024

AI Rating: 6

The report highlights new options trading for Royal Bank of Canada (Symbol: RY) with both put and call contracts now available. The $115.00 strike put option offers a current bid of $7.00, allowing investors to sell this contract while committing to purchase the stock at $115.00. Investors can benefit from a cost basis of $108.00, which is appealing compared to the current share price of $123.37. This presents an opportunity to capitalize on a possible discount, as the put option is currently out-of-the-money by approximately 7%.

Moreover, there is a significant chance (68%) that the put contract will expire worthless, yielding a return of 6.09% on cash commitment, or an annualized rate of 2.61%. This notion of utilizing options to enhance returns on investment aligns with various strategies to manage risk and improve overall profitability.

In terms of call options, the $125.00 strike price offers a current bid of $11.00. Should an investor choose to purchase RY shares at $123.37 and sell the call as a covered call, they could achieve a total return of 10.24% if the stock is called away at the January 2027 expiration. The call currently represents a 1% premium to the stock's trading price, with a 43% chance of expiration without being exercised. If this occurs, the investor would retain both the shares and the option premium, leading to an 8.92% boost in return or 3.82% annualized.

Notably, the implied volatility for the put option is 22%, while the call option sees an implied volatility of 19%. This comparison indicates differing levels of market expectations for price movement in the underlying stock. The actual trailing twelve-month volatility is calculated at 18%, balancing against expectations and presenting insight into the risk management side of trading these options.

Overall, the availability of options trading for RY stock may generate investor interest and influence stock prices through the demand created for these contracts. Such strategic financial instruments enable investors to navigate price fluctuations while optimizing their returns.

Stocks: RY