Exploring Put Options on REV Group Inc: A Strategic Approach

Investors eyeing REV Group Inc (Symbol: REVG) shares may find themselves hesitant to purchase at the current market price of $29.70 per share. One alternative strategy worth considering is selling put options. A notable example is the July put option with a $25 strike price, currently bidding at $1.30. By selling this put, investors can secure a premium that represents a 5.2% return on the $25 commitment, translating to a 20.6% annualized rate of return, a figure that some might refer to as the YieldBoost.

It’s essential to understand that selling a put option does not provide access to REVG’s potential upside like owning shares would. The put seller will only acquire shares if the contract is exercised. For the put option buyer, exercising the option at the $25 strike would be advantageous only if it yields a better outcome than selling at the current market price. Notably, unless REV Group Inc’s shares decline by 16.2%, resulting in a cost basis of $23.70 per share (after subtracting the $1.30 premium), the primary gain for the put seller remains the premium collected, yielding a substantial 20.6% annualized return.

Comparative Dividend Yields

Considering the annualized rate of 20.6% from the put option, it exceeds the 0.8% annualized dividend yield offered by REV Group Inc by 19.8%, based on the current share price. Should an investor choose to buy the stock to collect the dividend, they face increased risks. Specifically, the stock would need to drop 16.25% to match the $25 strike price.

Dividend Reliability

When contemplating dividends, it is important to recognize that they are not guaranteed and typically fluctuate with a company’s profitability. Conducting a thorough examination of REV Group Inc’s dividend history may aid in assessing whether the latest dividend is likely to persist, thereby informing expectations regarding the 0.8% annualized yield.

Historical Price Analysis

The chart below illustrates the trailing twelve-month trading history for REV Group Inc, highlighting the position of the $25 strike price within that context:

This chart, combined with REV Group Inc’s historical volatility, can provide insights into whether selling the July put at the $25 strike for a 20.6% annualized return presents an attractive risk-reward profile. Current calculations indicate that the trailing twelve-month volatility for REV Group Inc stands at 49%, based on the last 251 trading days and the current price of $29.70. For additional put option ideas across various expirations, visit the REVG Stock Options page at StockOptionsChannel.com.

Current Market Insights

During Thursday’s mid-afternoon trading session, put volume among S&P 500 components registered at 1.15 million contracts, against call volume of 1.39 million. This resulted in a put:call ratio of 0.82, notably higher than the long-term median of 0.65. This suggests an increased interest in put options among investors when compared to historical norms.

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Also see:

• Trucking Dividend Stocks
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• CHNG Market Cap History

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