Consider Selling Puts as an Alternative Strategy for INSP
Investors eyeing a purchase of Inspire Medical Systems Inc (Symbol: INSP) may want to consider an alternative approach instead of directly buying shares at the current market price of $146.22. One intriguing option is selling puts, specifically the November contract with a $125 strike. At the time of this writing, this put has a bid price of $13.50. If an investor sells this put, the premium collected yields a 10.8% return on the $125 commitment, translating to an annualized rate of 18.1%, which we call the YieldBoost at Stock Options Channel.
However, it’s important to note that selling a put does not provide investors with the same upside potential as owning shares. The put seller only acquires shares if the contract is exercised. If the stock price is above the $125 strike at expiration, the put will likely not be exercised. This means the option seller’s profit comes solely from collecting the premium unless Inspire Medical Systems Inc experiences a decline of 14.8%, leading to a cost basis of $111.50 per share upon exercising the contract (after subtracting the premium). Thus, the primary benefit for the put seller remains tied to earning that 18.1% return.
Below is a chart showcasing the trailing twelve-month trading history for Inspire Medical Systems Inc, with the $125 strike highlighted in green:
This chart, coupled with the stock’s historical volatility, can aid investors in evaluating whether selling the November put at the $125 strike for an 18.1% annualized return is worth the associated risks. Our analysis reveals that the trailing twelve-month volatility for Inspire Medical Systems Inc, which includes the last 251 trading day closing prices and the current price of $146.22, stands at 71%. For additional put option ideas with various expirations, investors can check the INSP Stock Options page on StockOptionsChannel.com.
In Thursday’s mid-afternoon trading session, the put volume across S&P 500 constituents was noted at 1.15 million contracts, while call volume reached 1.39 million, yielding a put:call ratio of 0.82. This figure is significantly above the long-term median put:call ratio of 0.65, indicating a heightened interest in put options compared to calls today. To discover what options traders are currently discussing, visit the latest updates on call and put options.
Top YieldBoost Puts of the S&P 500 »
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
