- Execution: SellToOpen 1 10-Nov-2023 105 Call @ $0.55 (Delta: 0.1786)
- Premium and risk: Per share: $0.55 (credit)
- Premium earned: $0.55 x 100 = $55
- Max risk: Capped at the stock's current market price of $96.40 x 100 = $9,640.
- Breakeven point: Varies based on stock cost basis
- 11-Day Yield: ($55 / $9,640) x 100 = 0.57%
- Annualized Yield: (0.57% x 365) / 11 = 19.05%
- Rationale: Writing a covered call provides additional income while capping the upside potential.
- Stock vs options comparison: The covered call secures immediate premium income with a capped upside potential, providing a 19.05% annualized yield if repeated.
When it comes to investing in options around Novo Nordisk's earnings, each strategy comes with its unique set of rewards and risks. The key is aligning your strategy with your market outlook and risk tolerance.
The comparisons between buying stock and using options reveal interesting facets:
- Buying calls: The leverage effect of a call option allows you to control the same amount of stock with less capital. A $1 increase in Novo Nordisk's stock results in an $73.766 gain with a call, compared to a $17 gain by holding 17 shares of the stock for the same amount of capital.
- Selling ITM puts: This strategy could allow you to acquire Novo Nordisk at a discounted rate compared to buying shares directly. The effective purchase price would be the strike minus the premium received, which can be calculated as a percentage discount against the current stock price.
- Buying puts: Options offer a leveraged way to bet against the stock with a defined risk, which can be particularly useful in volatile times.
- Writing covered calls: This strategy provides additional income and an annualized yield of 19.05%, which you can't get by just holding the stock.
Each option strategy can serve a purpose depending on your viewpoint on the stock and market conditions, making options a flexible tool for various investment goals.