Exploring Options: Selling Puts on Pros Holdings Inc for Potential Gains
Investors eyeing an acquisition of Pros Holdings Inc (Symbol: PRO) shares may hesitate at the current market price of $15.59 per share. One alternative strategy to consider is selling put options. A notable opportunity is the August put contract with a $12.50 strike price, currently bid at $1.05. Collecting this premium translates to an 8.4% return based on the $12.50 commitment, equating to an impressive annualized rate of 23.9%. At Stock Options Channel, this is referred to as the YieldBoost.
It’s essential to understand that selling a put does not grant the same upside potential as owning shares. A put seller only acquires shares if the contract is exercised. The exercise at the $12.50 strike price is beneficial only if it improves the situation compared to the current market price. This highlights the situation’s complexity, where a drop of 19.4% in PRO’s stock is needed for the contract to be exercised, resulting in a net cost basis of $11.45 per share (after accounting for the $1.05 premium). For this strategy, the primary reward lies in the premium collected, offering that appealing 23.9% annualized return.
Below is a chart illustrating the trailing twelve-month trading history for Pros Holdings Inc, highlighting the position of the $12.50 strike relative to this history:
This chart, alongside the Stock‘s historical volatility, can guide investors in determining whether the risks associated with selling the August put at the $12.50 strike for a 23.9% annualized return justify the potential rewards. Presently, the trailing twelve-month volatility for Pros Holdings Inc, based on 251 trading days, stands at 49%. For additional put option ideas with various expirations, check out the PRO Stock Options page on StockOptionsChannel.com.
During mid-afternoon trading on Wednesday, the put volume among S&P 500 components reached 1.09 million contracts, while call volume was at 1.39 million, resulting in a put:call ratio of 0.78 for the day. This ratio is significantly higher than the long-term median of 0.65, indicating a stronger interest in puts among traders compared to calls today. To explore what options traders are discussing, find out about the top 15 call and put options information.
Top YieldBoost Puts of the S&P 500 »
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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.
