Exploring Put Contracts

As Bumble Inc. (BMBL) options for the May 3rd expiration hit the market, investors are presented with intriguing opportunities. The $10.50 strike put contract, currently priced at 35 cents, offers an unconventional path. By selling-to-open this put, investors commit to buying the stock at $10.50, effectively reducing their cost basis to $10.15. This move, though atypical, could serve as an enticing alternative, especially with shares trading at $10.93. It’s akin to discovering a hidden gem at a bustling market.

Given the $10.50 strike’s 4% discount to the current stock price, this put contract is considered out-of-the-money by that margin. There’s a 65% chance the contract may expire without value. The current analytics project a 3.33% return on investment, translating to a 32.88% annualized return—a prospect that investors would be wise to contemplate.

The Call Contracts: A Different Perspective

On the call front, the $11.00 strike call contract is captivating with a bid of 55 cents, offering investors another avenue. Selling a “covered call” after purchasing BMBL shares at $10.93 entails committing to sell at $11.00. This maneuver could result in a 5.67% return if the stock is called away at expiration. However, prudent investors are cautioned about potentially missing out on substantial gains should BMBL’s share price surge. It’s analogous to having a winning lottery ticket but opting to cash it in prematurely.

With the $11.00 strike representing a 1% premium to the current stock price, there’s a 47% chance the covered call may expire without value. The analytics propose a 5.03% additional return for investors if this were to occur—a noteworthy 49.64% annualized increase, or a sweet cherry on top of the investment cake.

Comparing Implied and Actual Volatility

Noteworthy is the 47% implied volatility for the put contract, contrasting with the 58% for the call contract. In a deeper dive into data, the trailing twelve-month volatility, considering the previous 251 trading days and the current price of $10.93, stands at 47%. This variance highlights the dynamic nature of options trading and the need for a calculated approach to decision-making.

For a plethora of put and call options contract ideas worth exploring, a visit to StockOptionsChannel.com is highly recommended.

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Also see:

• Preferred Stock ETFs
• Top Ten Hedge Funds Holding TSCO
• PINS Options Chain

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