New Options Available for Generac Holdings: Analyzing Potential Strategies

Investors in Generac Holdings Inc (Symbol: GNRC) have a chance to explore new options that are set to expire on February 14th. Stock Options Channel has identified notable contracts to consider, including one put and one call option.

Attractive Put Option for Long-Term Investors

The put contract with a strike price of $155.00 currently has a bid of $5.00. If an investor sells-to-open this put, they commit to purchasing the stock at $155.00 while earning a premium that lowers their effective cost to $150.00 (excluding broker commissions). For those looking to buy GNRC shares, this could be a more appealing option compared to today’s price of $158.63/share.

The $155.00 strike price stands at about a 2% discount to the current trading price, which indicates that the option is out-of-the-money. There’s a 60% chance that this put contract could expire worthless. Stock Options Channel plans to monitor these odds over time and will provide updates on their website, including a chart detailing these changes. If the contract does expire worthless, the premium collected would yield a 3.23% return based on the capital committed, equating to an annualized return of 27.38%, a figure we refer to as YieldBoost.

Exploring Call Options: Potential Returns Explained

On the call side, there is a contract available at a $160.00 strike price with a current bid of $6.60. Should an investor buy GNRC shares at the current price of $158.63/share and opt to sell-to-open this call contract, they would agree to sell the shares at $160.00. By collecting the premium, the total return (excluding dividends) could reach 5.02% if the stock is called away by the February 14th expiration. However, significant upside potential may be lost if GNRC shares experience substantial gains, which highlights the importance of analyzing both trading history and company fundamentals.

Below is a chart depicting Generac Holdings’ past year of trading with the $160.00 strike price marked in red:

The $160.00 strike price indicates a 1% premium to the current stock price, meaning the call could also expire worthless. Current analytics suggest a 49% chance of this occurring. If the call does not get exercised, the investor retains their shares and keeps the premium, representing a 4.16% additional return on their investment, or 35.32% annualized, also referred to as YieldBoost.

Understanding Volatility and Market Conditions

Both the put and call contracts feature an implied volatility of around 42%. In comparison, the actual trailing twelve-month volatility, calculated using the last 251 trading days along with today’s price of $158.63, stands at 35%. For more investment ideas relating to put and call options, visit StockOptionsChannel.com.

Discover Top YieldBoost Calls of the S&P 500 »

Also see:

• Low Beta Stocks
• Top Ten Hedge Funds Holding HIBB
• CVLT Videos

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