Investors Consider Selling Puts on Veeco Instruments Stock
Investors looking to purchase Veeco Instruments Inc (Symbol: VECO) may find themselves reluctant to pay the current market price of $19.19 per share. An alternative strategy to consider is selling put options. Specifically, the December put at the $17 strike, with a current bid of $1.40, stands out. By collecting this premium, an investor could achieve an 8.2% return based on the $17 commitment or a notable 13.2% annualized rate of return.
While selling a put does not allow an investor to benefit from the upside potential of owning shares, it has its merits. The put seller will only acquire shares if the contract is exercised. The buyer of the put will exercise their option to sell at the $17 strike only if it is more advantageous than selling at the current market price. In essence, unless Veeco Instruments’ stock price falls by 11.6% and the contract is exercised, the primary benefit for the put seller remains the premium, resulting in an effective cost basis of $15.60 per share before broker commissions, after accounting for the $1.40 premium.
The chart below illustrates the trailing twelve-month trading history for Veeco Instruments Inc, highlighting in green the location of the $17 strike in relation to that history:
Combining the chart above with Veeco Instruments’ historical volatility and fundamental analysis can help investors evaluate whether selling the December put at the $17 strike for a 13.2% annualized return is an attractive risk-return proposition. The trailing twelve-month volatility for Veeco Instruments Inc, calculated using the last 250 trading days’ closing values along with today’s price of $19.19, stands at 47%. For additional put option contract ideas across various expirations, investors can check the VECO options page.
During mid-afternoon trading on Tuesday, the put volume among S&P 500 components reached 989,148 contracts, while call volume was at 1.21 million, resulting in a put-to-call ratio of 0.82. This figure is notably high compared to the long-term median put-to-call ratio of 0.65, indicating a surge in put buyers today versus call buyers.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
