Exploring Put Options for Transocean Ltd Amid Market Price Concerns

Investors interested in purchasing Transocean Ltd (Symbol: RIG) might find the current market price of $2.29 per share less appealing. As an alternative strategy, selling put options could be beneficial. One particular option to consider is the January 2027 put at the $1 strike, which is currently bid at 13 cents. By collecting this premium, investors could secure a 13% return on their $1 commitment, translating to a 7.5% annualized return.

Understanding the Risks of Selling Puts

It’s important to note that selling a put does not allow investors to participate in RIG’s potential upside like owning shares would. The option seller will only acquire shares if the contract is exercised. The buyer of the put would only opt to exercise it at the $1 strike if it benefits them more than selling shares at the market price. Without a significant drop in Transocean’s shares—specifically a decline of 56.1%—the put seller’s only potential gain is the collected premium, equating to a 7.5% annualized return.

Visualizing Historical Trends

The following chart illustrates Transocean Ltd’s trailing twelve-month trading history, using green to highlight the position of the $1 strike relative to that history:

Evaluating Potential Returns

The chart and the stock’s historical volatility can aid investors in deciding whether selling the January 2027 put at the $1 strike for a 7.5% annualized return is justified. We calculate Transocean Ltd’s trailing twelve-month volatility, based on the last 250 trading day closing values and the current price of $2.29, to be 60%. For additional put option ideas with various expiration dates, visit RIG’s stock options page.

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