Investors Explore Selling Puts for Shake Shack Inc Shares

As investors eye Shake Shack Inc (Symbol: SHAK) shares currently priced at $94.50, some may contemplate selling put options as a strategic alternative. A noteworthy put contract is the January 2027 put with a strike price of $65, which currently has a bid of $7.30. By selling this put, investors can collect a premium that represents an 11.2% return against the $65 obligation, translating to a 6.3% annualized rate of return—what we refer to as the YieldBoost at Stock Options Channel.

It’s important to note that selling a put does not allow investors to benefit from the potential upside of owning SHAK shares. The put seller will only end up with shares if the contract is exercised. The entity on the opposite side of the contract will only exercise it at the $65 strike if it’s more advantageous than selling at the market price. Unless Shake Shack’s shares decline by 30.9%, the put contract isn’t likely to be exercised, which would effectively yield a cost basis of $57.70 per share after accounting for the premium collected. Thus, the put seller’s primary gain is the premium, offering a 6.3% annualized return.

The chart below illustrates Shake Shack Inc’s trailing twelve-month trading history, highlighting the position of the $65 strike in green:

This chart, alongside Shake Shack’s historical volatility, serves as a useful tool for assessing whether selling the January 2027 put at $65 for a 6.3% annualized return is a sound choice considering the associated risks. We calculate Shake Shack’s trailing twelve-month volatility to be 45%, based on the last 251 trading day closing values as well as the current price of $94.50. For additional put option ideas at various expirations, check the SHAK Stock Options page at StockOptionsChannel.com.

During mid-afternoon trading on Wednesday, the put volume among S&P 500 components reached 837,454 contracts, matching the call volume exactly. This results in a put-to-call ratio of 0.75, which is higher than the long-term median ratio of 0.65. This suggests that there are more put buyers in the options market than would typically be expected based on historical trends. For insights into the most discussed call and put options today, visit this link.

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