The stock price of CVS Health Corp (CVS) has gone down by over 2% today till the late morning trading session. The stock had gone up over 3% in the past few days, however, it sharply fell today. The stock closed at $88.80 last Friday.
The Rhode Island based company is an American retail and health care company. It was originally named CVS Corporation, and was formed after the spinning-off of CVS Pharmacy from its original holding company Melville Corporation in 1996. It later acquired the pharmacy benefit management company Caremark Rx and was consequently renamed CVS Caremark Corporation in 2007. The company was renamed CVS Health in 2014, and since which time has operated the subsidiaries CVS Pharmacy, CVS Caremark, CVS Speciality, and the retail clinic MinuteClinic. In 2014, it ranked 10th on the Fortune 500 and 35th on the Fortune Global 500 list.
Meanwhile, Forbes reported that new options have become available today, for the January 2019 expiration. One of the key data points that goes into the price an option buyer is willing to pay, is the time value, so with 823 days until expiration the newly available contracts represent a possible opportunity for sellers of puts or calls to achieve a higher premium than would be available for the contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the CVS options chain for the new January 2019 contracts and identified one put and one call contract of particular interest.
The put contract at the $85.00 strike price has a current bid of $9.40. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $85.00, but will also collect the premium, putting the cost basis of the shares at $75.60 (before broker commissions). To an investor already interested in purchasing shares of CVS, that could represent an attractive alternative to paying $87.33/share today.
Because the $85.00 strike represents an approximate 3% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including Greeks and implied Greeks) suggest the current odds of that happening are 57%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 11.06% return on the cash commitment, or 4.90% annualized — at Stock Options Channel we call this the YieldBoost.
Our analysts have given a “HOLD” rating to CVS Health Corp‘s stock. Despite the sudden fall this week, the market to have a better response to this stock. Buying it at this stage might turn out to be a smart move.