Investing in Silicon Laboratories: Considering Put Options for Income

Investors looking to buy shares of Silicon Laboratories Inc (Symbol: SLAB) at market price of $89.19 may find value in alternative strategies, such as selling put options. A notable contract is the December put at the $55 strike, currently offering a bid of $3.60. By selling this put, an investor could collect a premium that equates to a 6.5% return on the $55 commitment, translating to a 9.7% annualized rate of return, a strategy referred to as YieldBoost by Stock Options Channel.

It’s important to note that selling a put option does not grant investors the upside potential associated with owning shares. Put sellers only acquire shares if the contract is exercised, which occurs if holding shares at the $55 strike yields a better outcome than selling at the current market price. Unless shares of Silicon Laboratories fall by 37.9% leading to the execution of the contract, the put seller’s only potential profit is from the collected premium, yielding that 9.7% annualized return.

Below is a chart illustrating the trailing twelve-month trading history for Silicon Laboratories Inc, with a highlighted area indicating the location of the $55 strike relative to that history:

Utilizing the chart and the stock’s historical volatility, investors can better assess whether selling the December put at the $55 strike for a 9.7% annualized return offers sufficient reward in light of the associated risks. Recent calculations indicate that Silicon Laboratories has a trailing twelve-month volatility of 52%, using the last 251 trading days and the current price of $89.19. For additional put option strategies with varying expirations, visit the SLAB Stock Options page on StockOptionsChannel.com.

During mid-afternoon trading on Wednesday, put volume among S&P 500 components reached 1.15 million contracts, while call volume stood at 1.43 million, resulting in a put:call ratio of 0.80. This figure is notably higher than the long-term median put:call ratio of 0.65, indicating a surge in put buyers relative to call buyers in the options market today.

Top YieldBoost Puts of the S&P 500 »

also see:

• DFLI Average Annual Return
• Institutional Holders of TSE
• LHDX shares outstanding history

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