A Promising 7.9% Annualized Return
Consider this scenario: Investors contemplating a purchase of United Therapeutics Corp (UTHR) stock at its current rate of $215.92/share may find an alternative strategy in selling puts quite appealing. The December put option at the $210 strike bears a bid of $14.00 at present and offers a 6.7% return against the $210 commitment, or an alluring 7.9% annualized rate of return. This trade, which we at Stock Options Channel fondly term as YieldBoost, presents an opportunity worth exploring.
Understanding the Potential of Selling Put Options
While selling a put doesn’t offer the same access to UTHR’s upward potential as owning shares does, it does pave the way for share ownership if the contract is exercised. The upside for the put seller comes from collecting the premium, provided UTHR sees its shares drop 2.8% and the contract is exercised, resulting in a cost basis of $196.00 per share (excluding broker commissions).
However, it’s crucial to recognize that the put seller only gains from exercising the contract if it yields a better outcome than selling at the current market price, thus minimizing counterparty risk and maximizing potential returns.
Analyzing Historical Volatility and Risk Considerations
To assess whether selling the December put at the $210 strike for the 7.9% annualized return is commendable relative to the associated risks, it’s wise to utilize United Therapeutics Corp’s trailing twelve-month trading history and historical volatility, both complemented by fundamental analysis. The stock’s trailing twelve-month volatility, considering the last 251 trading day closing values alongside the current price of $215.92, stands at 25%. This data, along with fundamental analysis, provides valuable insights for evaluating the risk-to-reward ratio.
Exploring Alternatives and Recommendations
For additional put options contract ideas across various available expirations, investors can explore the UTHR Stock Options page on StockOptionsChannel.com, offering richer opportunities for potential trades.
Investors can explore top YieldBoost Puts of the S&P 500 for additional insights, potentially expanding their options horizon smartly and cautiously amidst enticing opportunities in the market.
Also see:
Utilities Stocks Hedge Funds Are Buying
Institutional Holders of MPRO
Institutional Holders of STWO
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
