Examining Under Armour’s Options: Selling Puts as a Strategy
Investors looking to purchase shares of Under Armour Inc (Symbol: UA) at the current market price of $6.11 per share may find selling puts to be a viable alternative. An intriguing option is the October put at the $5 strike, which, at the time of writing, has a bid of 25 cents. Collecting this premium yields a 5% return on the $5 commitment, equating to an annualized rate of 11.8%.
Selling a put does not grant investors the same upward potential as owning shares, since the put seller only acquires the stock if the contract is exercised. The party on the other side will only exercise the option if it offers a better outcome than selling at the current market price. Therefore, the put seller’s only scenario for gaining upside is if Under Armour’s shares fall by 17.8%, triggering the contract at the $5 strike. This situation would lead to a cost basis of $4.75 per share, after accounting for the 25 cents collected from the premium, before broker commissions. Consequently, the attractive aspect for the put seller remains solely the premium earned for an 11.8% annualized return.
The chart below illustrates Under Armour’s trailing twelve-month trading history, marking in green the position of the $5 strike relative to this historical data:
Analyzing the chart, along with Under Armour’s historical volatility, can assist in determining whether selling the October $5 put for an 11.8% annualized return aligns with potential risks and rewards. Based on the last 250 trading days and including today’s price of $6.11, the calculated trailing twelve-month volatility for Under Armour stands at 54%. For additional put option strategies across various expiration dates, please refer to the UA Options page.
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Also see:
- Top Ten Hedge Funds Holding ULTY
- PAYX Market Cap History
- Funds Holding UPLD
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
