New Options for Etsy Inc: Insights on Potential Returns

Today, investors in Etsy Inc (Symbol: ETSY) gained access to new options set to expire on July 18th. With 128 days remaining until expiration, these contracts may present opportunities for those looking to sell puts or calls. The time value in options pricing increases the potential for achieving higher premiums compared to contracts with nearer expiration dates. Utilizing the YieldBoost formula at Stock Options Channel, we examined the ETSY options chain and identified two contracts of particular interest.

Put Contract Insights

The put contract priced at $45.00 currently has a bid of $2.26. An investor who sells to open this put would agree to purchase the shares at $45.00. By collecting the premium, the effective cost basis on the shares would drop to $42.74 (not including broker commissions). For someone already inclined to buy ETSY shares, this option may provide a more attractive entry point than purchasing the stock at today’s market price of $45.75.

This $45.00 strike represents an approximate 2% discount to the current trading price, placing it out-of-the-money by the same percentage. Current analytical data suggest there’s a 61% chance that this put option could expire worthless. Stock Options Channel will continue to monitor these odds, updating data periodically on our website’s contract detail page. If the contract does expire worthless, the premium earned would yield a 5.02% return on the cash commitment, or an annualized rate of 14.32%—this metric is what we refer to as the YieldBoost.

Below is a chart illustrating Etsy Inc’s trailing twelve-month trading history, with the $45.00 strike highlighted in green:

Call Contract Analysis

On the calls side, the contract at the $55.00 strike is currently bidding at 35 cents. An investor purchasing ETSY shares at the current price of $45.75 and subsequently selling the $55.00 call as a “covered call” would be agreeing to sell the stock at that higher price. Including the premium collected, this strategy could deliver a 20.98% total return (excluding dividends, if applicable) if the stock is called away at expiration. However, this scenario implies a potential upside may be disregarded if ETSY shares appreciate significantly, emphasizing the importance of analyzing historical performance and business fundamentals.

Below is a chart that highlights ETSY’s trailing twelve-month trading history, with the $55.00 strike marked in red:

Since the $55.00 strike represents a 20% premium over the current trading price, there is also a chance the covered call could expire worthless. In this case, the investor retains the shares and the premium received. Current analysis indicates a 68% likelihood this scenario might occur. For ongoing updates on these odds, Stock Options Channel will track and publish changes along with the trading history on our website. If the covered call does expire worthless, the premium received would yield an additional 0.77% return, or 2.18% annualized—also known as the YieldBoost.

The implied volatility for the put contract stands at 48%, while the call contract has an implied volatility of 46%. Meanwhile, we estimate the actual trailing twelve-month volatility, based on the last 250 trading day closing values and currently priced at $45.75, to be 42%. For more options contract ideas worth exploring, please visit StockOptionsChannel.com.

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