Evaluating Put Options for Builders FirstSource Inc. Stock
Investors interested in acquiring Builders FirstSource Inc. (Symbol: BLDR) may find themselves hesitant to pay the current market price of $122.13 per share. An alternative strategy worth considering is selling put options. Notably, the January 2027 put with a $70 strike price is currently priced at a bid of $4.30. Collecting this premium equates to a 6.1% return based on the $70 commitment, or a 3.6% annualized return.
Understanding the Risks and Returns of Selling Puts
It’s crucial to note that selling a put option does not provide investors with the same upside potential as owning shares. The put seller will only acquire the shares if the contract is exercised. In this scenario, the counterparty to the option would choose to exercise the contract at the $70 strike price only if it offers a better outcome than selling at the current market price. This means that unless Builders FirstSource Inc. shares decline by 43.1%, resulting in a cost basis of $65.70 per share (after accounting for the $4.30 premium), the seller’s only upside is the premium collected, yielding a 3.6% annualized return.
Historical Performance Insights
Below is a chart showing Builders FirstSource Inc.’s trailing twelve-month trading history, highlighting the position of the $70 strike price concerning that history:
This chart, along with the stock’s historical volatility, can serve as valuable tools when deciding whether to sell the January 2027 put at the $70 strike for a 3.6% annualized return. The trailing twelve-month volatility for Builders FirstSource Inc. is calculated at 47%, based on the last 249 trading days and the current price of $122.13. For additional put option contract ideas across various expirations, consider visiting the BLDR stock options page for more information.
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Additional Resources:
- Institutional Holders of RBCP
- EGLT Options Chain
- Funds Holding IIII
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
