Exploring Put Options on 89bio Inc: A Strategic Investment Insight

Investors eyeing a purchase of 89bio Inc (Symbol: ETNB) shares may hesitate at the current market price of $8.34 per share. However, they might find value in considering an alternative strategy: selling puts. One particularly intriguing option is the December put at the $7.50 strike, which, at the time of writing, has a bid price of $1.45. Collecting this premium yields a return of 19.3% against the $7.50 commitment, translating to an impressive 25.1% annualized rate of return, a concept we refer to as the YieldBoost at Stock Options Channel.

Understanding the Dynamics of Selling Puts

It’s important to note that selling a put does not allow an investor to gain from the potential upside of ETNB shares as owning the stock would. The put seller only acquires shares if the contract is exercised. The counterparty benefits from exercising the contract at the $7.50 strike only if it provides a better outcome than selling shares at the current market price. For this option to be exercised, 89bio Inc’s stocks must drop by 10.8%. If the contract is exercised, the effective cost basis would be $6.05 per share (after accounting for the $1.45 premium). Consequently, the primary advantage for the put seller lies in collecting the premium, capitalizing on that 25.1% annualized return.

Chart Analysis and Market Context

Visual aids can enhance understanding; below is a chart displaying the trailing twelve-month trading history for 89bio Inc, with the $7.50 strike highlighted:

This chart, along with 89bio Inc’s historical volatility, offers a helpful framework to evaluate whether selling the December put at the $7.50 strike for a 25.1% annualized return justifies the associated risks. Based on our calculations, the trailing twelve-month volatility for 89bio Inc, using the last 250 trading day closings along with the current price of $8.34, stands at 70%. For additional put options ideas across various expirations, check out the ETNB Stock Options page of StockOptionsChannel.com.

Market Trends in Options Trading

In Thursday afternoon trading, the total put volume among S&P 500 components reached 1.17M contracts, in contrast to call volume of 1.52M. This results in a put:call ratio of 0.77, which is higher than the long-term median ratio of 0.65. This indicates a notable spike in put buying activity compared to typical volumes observed. To discover the 15 prominent call and put options traders are discussing today, click here.

Top YieldBoost Puts of the S&P 500 »

Also see:

• Services Stocks Hedge Funds Are Buying
• Institutional Holders of MSFX
• HGER Options Chain

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