HomeAway, Inc (NASDAQ:AWAY) well on its options way

Posted by Kristi Scott August 22, 2013 0 Comment 813 views


HomeAway, Inc (NASDAQ:AWAY) investors saw some new options available for a 2014 April expiration. One of the main data-points that goes into any price that an option-buyer is willing to pay, is its time-value. Thus, with 241-days until expiry the new contracts represent a potential –opportunity for puts and calls sellers to achieve a premium that is higher. This premium would be available for these contracts with a much closer expiration. Of these 2014 April contracts, one call and one put option is of particular interest.

The put contract

The put-contract at the $25.00 strike-price has a current-bid of $2.00. If an investor were to sell to open that put-contract, they would be committing to buy the company stock at $25.00. In addition, they will collect the premium, setting the cost-basis of the shares at $23(excluding broker commission). To any investor who is already interested in buying AWAY shares, this could represent an attractive-alternative to having to pay $2.69 per share, today.

Since the $25.00 strike represents approximately a 13% discount to the present trading-price of AWAY stock, there is a distinct possibility that the put-contract may also expire worthless. The current analytical-data suggests that the odds of that happening currently are 72%. In the event that the contract expires worthless, the premium will represent 8.00% return on the cash-commitment, or 12.12 percent on an annualized basis.

The call contract

As far as the calls side of the option-chain is concerned, the call-contract at the $30.00 strike-price currently has a bid of $43.00. If an investor buys the shares at the present price-level of $28.69 per share, and sell to open that particular call contract as a covered-call, they will be committing to sell the AWAY stock at $30.00.

HomeAway, Inc (NASDAQ:AWAY) is an online marketplace for the vacation-rental industry. As of 31 December 2012, it operated its online marketplace via 44 different websites in 13 different languages.

 


About Kristi Scott

Kristi Scott joined GDP Insider in 2005 as a Wall Street reporter for the Business and Market section. Kristi covers the stock market, financial markets and personal finance. Her awards have come from the National Federation of Professional Writers, the Ohio Newspaper Association, the Cleveland Press Club, the Society of Professional Journalists and Suburban Newspapers of America. Kristi was named SNA's national Journalist of the Year

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