February 2023 Options Now Available for DXC Technology (DXC)

Investors in DXC Technology Co (symbol: DXC) saw new options become available today, expiring February 2023. One of the key inputs that go into the price an option buyer is willing to pay is the time value, so with 91 days until expiration newly available contracts present a potential opportunity for put or call sellers to obtain a higher premium than would be available for contracts with a closer expiration. On the Stock Options Channel, our YieldBoost formula searched up and down the DXC options chain for February 2023 new contracts and identified one put and one call contract of particular interest.

The put contract at the strike price of $24.00 has a current bid of 50 cents. If an investor were to sell to open that put contract, they commit to buying the stock at $24.00, but will also collect the premium, setting the cost basis of the stock at $23.50 (before broker’s fees). For an investor already interested in purchasing DXC’s stock, this could be an attractive alternative to paying $28.33 per share today.

Since the $24.00 strike represents a discount of approximately 15% to the stock’s current trading price (in other words, it is out-of-the-money by that percentage), there is also the possibility that the contract put expires worthless. Current analytical data (including Greeks and implied Greeks) suggest that the current odds of this happening are 99%. The Stock Options Channel will monitor these odds over time to see how they change by posting a chart of those numbers on our website on the contract details page for this contract. If the contract expired worthless, the premium would represent a 2.08% return on the cash commitment, or 8.36% annualized – on the Stock Options Channel we call this the Increased yield.

Below is a chart showing the past twelve months trading history for DXC Technology Co, highlighting in green where the $24.00 strike is relative to that history:

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Moving to the call side of the options chain, the call contract at the strike price of $29.00 has a current bid of 20 cents. If an investor were to buy shares of DXC stock at the current price level of $28.33 per share, and then sell to open that call contract as a “covered call,” they are committing to sell the shares at $29.00. Assuming the call seller will also collect the premium, this would lead to a total return (excluding any dividends) of 3.07% if the stock is retired at the February 2023 maturity (before broker’s fees). Of course, if DXC stock really goes up, there could potentially be a lot of upside on the table, which is why it becomes important to look at the twelve-month trading history for DXC Technology Co, as well as study the fundamentals of the business. Below is a chart showing DXC’s last twelve month trading history, with the $29.00 strike highlighted in red:

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Considering the fact that the $29.00 strike represents a roughly 2% premium to the stock’s current trading price (in other words, it is out-of-the-money by that percentage), there is also the possibility that the covered call contract expires worthless, in which case the investor would keep both his shares and the premium collected. Current analytical data (including Greeks and implied Greeks) suggest that the current odds of this happening are 99%. On our website on the contract details page for this contract, the Stock Options Channel will monitor those odds over time to see how they change and will post a graph of those numbers (the trading history of the option contract will also be tracked). If the covered call contract were to expire worthless, the premium would represent a 0.71% increase in the excess return to the investor, or 2.83% annualised, which we call Increased yield.

Meanwhile, we calculate the trailing twelve-month effective volatility (considering the closing values ​​of the last 252 trading days and today’s price of $28.33) to be 52%. For more ideas on put and call options contracts worth looking into, visit StockOptionsChannel.com.

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See also:

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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