Comfort Systems USA Inc: Evaluating Put Options Strategy for Investors
Investors interested in acquiring shares of Comfort Systems USA Inc (Symbol: FIX) but hesitant about the current market price of $349.59 per share may find selling puts a viable alternative strategy. Notably, the October put contract with a $280 strike price has a bid of $20.10. By collecting this premium, investors would earn a 7.2% return based on their $280 commitment, translating to a 14.2% annualized rate of return—referred to as YieldBoost at Stock Options Channel.
It is crucial to note that selling a put does not provide exposure to FIX’s upside potential as owning shares does. The seller of the put incurs ownership only if the contract is exercised, which occurs when exercising at the $280 strike provides a better outcome than selling at the current market price. Thus, unless Comfort Systems USA Inc’s shares decline by 20.2%, the put seller’s sole benefit is the premium collected for the 14.2% annualized return.
Interestingly, this 14.2% annualized return exceeds the 0.5% annualized dividend paid by Comfort Systems USA Inc by 13.7%, based on the present share price. However, purchasing stock at the current market price for dividend collection introduces greater risk, as the stock must decrease by 20.2% to reach the $280 strike price.
When discussing dividends, it’s essential to understand that dividend amounts can be unpredictable and often fluctuate with a company’s profitability. Thus, reviewing the dividend history chart for FIX can provide insight into the sustainability of the most recent dividend and whether a 0.5% annualized yield is a realistic expectation.
The chart below illustrates the trailing twelve-month trading history for Comfort Systems USA Inc, highlighting the position of the $280 strike price relative to historical performance:
The trading chart and the stock’s historical volatility serve as valuable tools, especially when combined with fundamental analysis, to assess whether selling the October put at the $280 strike for a 14.2% annualized return offers an adequate risk-reward ratio. The trailing twelve-month volatility for Comfort Systems USA Inc, calculated from the last 251 trading days and the current share price of $349.59, stands at 60%. For additional put option opportunities with various expiration dates, visit the FIX Stock Options page at StockOptionsChannel.com.
During mid-afternoon trading on Wednesday, put volume among S&P 500 components reached 1.15 million contracts, while call volume was 1.43 million, resulting in a put-to-call ratio of 0.80 for the day. This figure is relatively high compared to the long-term median ratio of 0.65, indicating an increased number of put buyers compared to typical trading levels.
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The views and opinions expressed herein are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
