Exploring Put Options for Constellation Energy Corp Stock Investments

For investors looking to acquire Constellation Energy Corp (Symbol: CEG) but hesitant to pay its current market price of $221.27 per share, selling puts may present a viable alternative strategy. One noteworthy option is the January 2027 put at the $130 strike, which currently has a bid of $13.20. Collecting this bid offers a 10.2% return against the $130 commitment, translating to a 5.9% annualized rate of return.

However, it’s crucial to note that selling a put doesn’t allow investors to capture the potential upside of CEG shares directly. A put seller only takes ownership of the shares if the contract is exercised, which would occur only if exercising the option is more advantageous than selling at the prevailing market price. Unless Constellation Energy’s share price drops 41% to trigger the contract, the only benefit to the put seller is the premium earned, equating to a 5.9% annualized return.

This 5.9% annualized figure noticeably surpasses CEG’s current annualized dividend yield of 0.7% by 5.2%. If an investor opts to buy the stock at the market price to collect the dividend instead, they face a higher downside risk, needing the stock to fall over 41% to reach the $130 strike price.

When assessing dividends, it’s essential to recognize that they are not guaranteed and can fluctuate with the company’s profitability. Therefore, examining Constellation Energy’s dividend history can help gauge whether the current 0.7% yield is sustainable.

The following chart outlines the trailing twelve-month trading history for Constellation Energy Corp, with the $130 strike clearly indicated:

Combining the chart along with CEG’s historical volatility aids in determining if selling the January 2027 put at the $130 strike for a 5.9% annualized return offers an appealing risk-reward balance. Our calculations show that CEG’s trailing twelve-month volatility, based on the last 250 trading day closing values and the current price of $221.27, stands at 69%.

For alternative put option strategies with varying expirations, refer to the CEG Stock Options page for more insights.

As of mid-afternoon trading on Wednesday, the put volume among S&P 500 components reached 1.30 million contracts, compared to 1.53 million calls, resulting in a put-call ratio of 0.85. This ratio is notably high compared to the long-term median of 0.65, indicating a significant increase in put buying relative to call buying today.

For current discussions in options trading, check on the most sought-after call and put options trending today.

Top YieldBoost Puts of the Nasdaq 100 »

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