Exploring Put Options as a Strategy for Ardelyx Inc Stock

Investors eyeing Ardelyx Inc (Symbol: ARDX) Stock at the current market price of $4.87/share might find alternative strategies appealing. One particular strategy involves selling puts, specifically the October put option at the $4 strike, which is currently bid at 45 cents. Collecting this premium yields an 11.2% return on the $4 commitment, translating to a robust 20.5% annualized rate of return. It’s a strategy we refer to as YieldBoost on the Stock Options Channel.

Although selling a put option doesn’t capture ARDX’s upside potential like owning shares would, it does offer a defined return on commitment. The put seller only owns the shares if the option is exercised. The option is more likely to be exercised if the market price falls below the strike price. This situation would only be beneficial to the buyer if they can achieve greater value than selling at market price. To clarify, should Ardelyx Inc’s shares drop by 18.4%, the contract would be exercised, leading to an effective cost basis of $3.55 per share before broker fees. This is calculated by taking the $4 strike price and subtracting the 45-cent premium.

The chart below illustrates the trailing twelve-month trading history for Ardelyx Inc, highlighting the position of the $4 strike within this context:

This chart, together with Ardelyx Inc’s historical volatility, serves as a valuable resource for evaluating whether selling the October put at the $4 strike for a 20.5% annualized return justifies the associated risks. We determined the trailing twelve-month volatility to be 79%, based on the last 250 trading days’ closing values and the current price of $4.87. For additional put option ideas with varying expirations, visit the ARDX Stock Options page at StockOptionsChannel.com.

Mid-afternoon trading on Monday revealed that put volume among S&P 500 components reached 1.37 million contracts, while call volume stood at 1.64 million, resulting in a put:call ratio of 0.83. This figure is notably high compared to the long-term median ratio of 0.65, indicating a significant uptick in put buyers relative to call buyers in today’s options trading.

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