Understanding Options Trading for Ross Stores Inc.

Investors have recently seen new trading opportunities for Ross Stores Inc. (Ticker: ROST) as options with an expiration date of September 26th hit the market. Utilizing Stock Options Channel’s YieldBoost formula, we examined the ROST options chain and identified a noteworthy put contract as well as a call contract.

Insights on the Put Contract

The put option set at a $141.00 strike price currently has a bid of $3.00. If one were to sell-to-open this put contract, they agree to buy the shares at $141.00. However, by doing so, they’ll earn a premium, effectively lowering their cost basis to $138.00 per share (excluding brokerage commissions). For investors who already intend to buy ROST shares, this could present a compelling alternative, especially considering the current market price of $145.63 per share.

Since the $141.00 strike is roughly a 3% discount from the stock’s current trading price, it’s possible the put option could expire worthless. Current analytics suggest a 67% probability of this event. Stock Options Channel will monitor these odds and provide a chart on our website detailing these changes. If the contract does expire without value, the collected premium will yield a return of 2.13% on the cash commitment, equivalent to an annualized return of 15.53%, a concept we refer to as YieldBoost.

Call Contract Overview

Shifting focus to the call options, the contract with a $149.00 strike price currently carries a bid of $4.90. Should an investor purchase ROST shares at the present price of $145.63 and then sell-to-open the call contract (a strategy known as a "covered call"), they would agree to sell the stock at $149.00. With the additional premium received, this would lead to a total potential return (without factoring in dividends) of 5.68% if the shares are called away by the September 26th expiration date. However, it’s important to note that significant upsides may be missed if ROST shares experience substantial growth, underscoring the necessity of analyzing both the historical trading patterns of Ross Stores and its underlying business fundamentals.

Potential Outcomes of the Call Option

The $149.00 strike represents about a 2% premium over the current trading price, indicating there’s a chance the covered call might expire out-of-the-money. If that occurs, the investor retains both their shares and the premium collected. Current analytical data gives a 52% probability of this happening. As with the put option, Stock Options Channel will continually track these odds and update our website with this information.

If the covered call expires worthless, the premium received would provide an additional return of 3.36% for the investor, amounting to an impressive annualized rate of 24.56%, also known as YieldBoost.

Key Metrics of Implied Volatility

In terms of volatility, the implied volatility for the put option stands at 29%, while the call option reflects an implied volatility of 32%. Meanwhile, the actual trailing twelve-month volatility—calculated based on the closing values of the last 250 trading days coupled with today’s stock price of $145.63—shows a value of 26%.

For those exploring more put and call options worth considering, Stock Options Channel is a valuable resource for further research and information.