SRPT September 12th Options Begin Trading

The article outlines two options strategies for Sarepta Therapeutics (SRPT) at its current $16.90 trading price. A cash-secured put at the $16.50 strike offers an effective entry price of $15.75 with a potential 38.58% annualized return if the option expires worthless (60% probability). Concurrently, a covered call using the $23.00 strike provides a 36.98% return if shares are called away, or a 7.53% annualized yield if the call expires worthless (63% probability), with both strategies leveraging high implied volatilities.

Analysis

The options market for Sarepta Therapeutics (SRPT) presents opportunities to capitalize on elevated volatility, with implied volatility for the specified put and call contracts at 122% and 150% respectively, both significantly above the stock's trailing twelve-month historical volatility of 103%. For investors seeking to acquire the stock, selling a cash-secured put at the $16.50 strike provides a method to potentially purchase shares at an effective cost basis of $15.75, a discount to the current $16.90 price. Should this out-of-the-money put expire worthless, which has a 60% probability according to current data, the premium collected would represent a 38.58% annualized return on the cash commitment. Conversely, for existing shareholders, a covered call strategy at the $23.00 strike offers a way to generate income. This trade presents a 63% chance of expiring worthless, providing a 7.53% annualized yield boost, or a total return of 36.98% if the stock is called away. Both strategies are designed to monetize the high option premiums resulting from SRPT's notable volatility.

Key Decisions for Investors

• Investors bullish on SRPT but seeking a disciplined entry point could consider selling the $16.50 cash-secured put to either acquire shares at an effective cost of $15.75 or generate a substantial 38.58% annualized yield.
• Current SRPT shareholders could evaluate selling the $23.00 covered call to generate income, but must be willing to cap their upside potential at a total return of 36.98% if the stock price appreciates significantly.
• Given that implied volatility (122%-150%) exceeds historical volatility (103%), investors should be aware that option premiums are rich, reflecting market expectations for sharp price movements, and should monitor the stock's trajectory closely when engaging in these strategies.