Investors in CloudFlare Inc (Symbol: NET) are engaging in new options trading for contracts expiring on October 17th, representing 88 days until expiration. A notable put contract at a $195.00 strike price currently has a bid of $17.65, offering a potential cost basis of $177.35 per share, a 2% discount from the current price of $198.79/share. The probability of this put contract expiring worthless is estimated at 60%, translating to a potential 9.05% return on cash commitment, or 37.54% annualized.
On the call side, a contract at a $200.00 strike price has a bid of $21.90. If investors purchase shares at $198.79 and sell this call as a covered call, the total return at expiration could be 11.63%, while the chance of the contract expiring worthless is pegged at 43%. The premium from the covered call could represent an 11.02% boost to the investor’s return, or 45.69% annualized. Both put and call contracts have an implied volatility of approximately 56%.
