Interesting SUPN Put And Call Options For November 21st

The article outlines two options strategies for Supernus Pharmaceuticals (SUPN) designed to generate enhanced returns: selling a $46.00 strike put for a $1.10 premium, offering a 13.85% annualized yield if it expires worthless or an effective purchase price of $44.90 if assigned; and a covered call strategy involving selling a $48.00 strike call for $0.55 against shares bought at $46.35, yielding a potential 4.75% return by November 21st if called away, or a 6.87% annualized premium boost if the call expires worthless. Both strategies, with probabilities of expiring worthless around 54-56%, capitalize on SUPN's implied volatility (41-43%) which currently exceeds its 35% trailing 12-month actual volatility.

Analysis

The options market for Supernus Pharmaceuticals (SUPN) is presenting opportunities for income generation, driven by a notable spread between implied and historical volatility. Current implied volatility stands at 41-43%, significantly higher than the stock's trailing twelve-month actual volatility of 35%. This elevated premium in the options market benefits sellers. The article outlines two specific strategies to capitalize on this: selling a cash-secured put at the $46.00 strike, which offers an effective entry point at $44.90 (below the current $46.35 price) or a 13.85% annualized yield if the contract expires worthless, an event with a 56% probability. Alternatively, for existing shareholders, a covered call strategy at the $48.00 strike could yield a 4.75% total return if the stock is called away by the November 21st expiration or add a 6.87% annualized premium boost if it expires worthless, which has a 54% probability. Both strategies are structured for investors with a neutral-to-bullish outlook, aiming to either acquire the stock at a discount or enhance returns on an existing position by monetizing the rich option premiums.

Key Decisions for Investors

• Investors with a bullish outlook on SUPN could consider selling the $46.00 strike put as a way to potentially acquire shares at an effective cost basis of $44.90, which is below the current market price, while generating income.
• Current shareholders seeking to generate yield can evaluate selling the $48.00 strike covered call, which offers a 6.87% annualized premium boost but caps the total return at 4.75% if the stock price exceeds $48.00 by the November expiration.
• The primary strategic consideration is the elevated implied volatility (41-43%) relative to historical volatility (35%), which makes selling options premium on SUPN an attractive proposition for generating income, assuming the stock does not experience a volatility shock beyond what is currently priced in.