Exploring Put Options as a Strategy for Harmonic, Inc. Investors

Investors pondering a purchase of Harmonic, Inc. (Symbol: HLIT) at the current market price of $9.60 per share may want to consider selling put options as an alternative strategy. One noteworthy option is the October put contract at the $7.50 strike, currently bid at 60 cents. This bid offers a premium that translates to an 8% return on the $7.50 commitment, or an annualized return of 14.8%, a figure we refer to as the YieldBoost at Stock Options Channel.

However, it’s important to understand that selling a put does not grant the investor access to HLIT’s potential upside, which owning shares would provide. The seller of the put only acquires shares if the contract is exercised. This means that the party on the opposite side of the contract would only exercise the option if it yields a better financial outcome than selling at the current market price. If Harmonic, Inc.’s share price drops by 21.6% and the put option is exercised, the investor’s cost basis would come to $6.90 per share, adjusting for the collected premium of 60 cents. Therefore, the primary advantage for the put seller is capturing that premium for a 14.8% annualized return, without a chance for further upside unless the stock falls significantly.

Below is a chart depicting the trailing twelve-month trading history for Harmonic, Inc., with the $7.50 strike price highlighted in green:

This chart, along with Harmonic’s historical volatility, can aid investors in assessing whether selling the October put at the $7.50 strike is a suitable risk-reward proposition for the 14.8% annualized return. The trailing twelve-month volatility for Harmonic, which incorporates the last 251 closing prices along with today’s price of $9.60, stands at 53%. For additional put options contracts with various expiration dates, visit the HLIT Stock Options page on StockOptionsChannel.com.

As of mid-afternoon trading on Wednesday, the total put volume among S&P 500 components was 837,454 contracts, matched by call volume at 837,454, yielding a put:call ratio of 0.75. This figure is elevated compared to the long-term median put:call ratio of 0.65. Essentially, this indicates that the market has more put buyers than one would typically expect based on the number of call buyers observed today, an interesting trend in options trading.

Top YieldBoost Puts of the S&P 500 »

Also See:

• Institutional Holders of FUTU
• Top Ten Hedge Funds Holding ETY
• Funds Holding MCW

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