Exploring Options: Fair Isaac Corp’s Put Strategy for Investors

Investors eyeing Fair Isaac Corp (Symbol: FICO) stock, currently priced at $1938.83 per share, may consider selling puts as a strategic alternative. One notable option is the December put at the $1660 strike, which has a bid of $100.70 at the time of writing. By collecting this bid as premium, sellers can achieve a 6.1% return based on the $1660 commitment, translating to a 9.4% annualized rate of return, a yield commonly referred to as YieldBoost.

However, selling a put does not provide the same potential upside as owning shares. If the contract is exercised, the put seller becomes a shareholder only if Fair Isaac Corp’s stock falls to $1660 or lower. In this scenario, the seller’s optimal action occurs only if selling at this strike price yields a better result than the current market price. If Fair Isaac’s shares decline by 14.3% and the contract is exercised, the adjusted cost basis would be $1559.30 per share (calculated by subtracting the $100.70 premium from the $1660 strike price), not accounting for broker commissions. Hence, put sellers can only gain from the premium for the 9.4% annualized yield unless obligated to take on shares.

Below is a chart illustrating the trailing twelve-month trading history for Fair Isaac Corp, highlighting the $1660 strike in green relative to its historical trajectory:

This chart, along with Fair Isaac Corp’s historical volatility, can aid investors in assessing whether selling the December put at the $1660 strike for a 9.4% annualized return offers a favorable risk-reward balance. The trailing twelve-month volatility for Fair Isaac Corp is calculated at 33%, based on the last 249 trading day closing values and the current price of $1938.83. For additional put option strategies across various expiration dates, please refer to the FICO 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.