Exploring Put Options for LGI Homes Investors Looking to Save

Investors eyeing LGI Homes, Inc. (Symbol: LGIH) at the current market price of $55.74 per share may find selling puts to be a viable alternative strategy. Notably, the August put contract at the $45 strike, which has a bid of $2.50, stands out. By selling this put, investors can earn a premium, yielding a 5.6% return based on the $45 commitment, or an impressive 16.9% annualized return, a figure we refer to as YieldBoost at Stock Options Channel.

It is essential to understand that selling a put does not grant the investor the benefit of LGIH’s upside potential like owning shares would. The put seller only acquires shares if the contract is exercised. The buyer of the put would only choose to exercise the option at the $45 strike if it offers a better outcome than selling at the current market price. Unless LGI Homes’ shares drop by 19.3% causing the contract to be executed (resulting in an effective cost basis of $42.50 per share after accounting for the $2.50 premium), the primary gain for the put seller is the collected premium, equating to the 16.9% annualized return.

Below is a chart illustrating the trailing twelve-month trading history for LGI Homes, Inc., with the $45 strike highlighted in green relative to previous price movements:

The above chart, combined with LGI Homes’ historical volatility, can be instrumental in evaluating whether selling the August put at the $45 strike for a 16.9% annualized return is favorable when considering the associated risks. Our calculations indicate that the trailing twelve-month volatility for LGI Homes (an analysis of the last 251 trading day closing values alongside the current price of $55.74) stands at 45%. For additional put option ideas across various expiration dates, check out the LGIH Stock Options page on StockOptionsChannel.com.

During mid-afternoon trading on Thursday, the put volume among S&P 500 components reached 1.15 million contracts, with call volume at 1.39 million, resulting in a put:call ratio of 0.82. This figure is significantly higher compared to the long-term median put:call ratio of 0.65. Essentially, there are more put buyers in the options trading today than typically witnessed, particularly in comparison to call buyers.
Discover which 15 call and put options are generating conversation in today’s market.

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Also See:

• NFS Videos
• HCI Videos
• RVPH market cap history

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