Investors considering a purchase of
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Do options carry counterparty risk? This and six other common options myths debunked). So unless ServiceNow Inc sees its shares decline 19.3% and the contract is exercised (resulting in a cost basis of $46.90 per share before broker commissions, subtracting the $8.10 from $55), the only upside to the put seller is from collecting that premium for the 7.3% annualized rate of return.
Below is a chart showing the trailing twelve month trading history for ServiceNow Inc, and highlighting in green where the $55 strike is located relative to that history:
The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the January 2017 put at the $55 strike for the 7.3% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for ServiceNow Inc (considering the last 252 trading day closing values as well as today's price of $68.04) to be 45%. For other put options contract ideas at the various different available expirations, visit the NOW Stock Options page of StockOptionsChannel.com.
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