First Week of August 15th Options Trading For Bio-Techne (TECH)

The article outlines two options strategies for Bio-Techne Corp (TECH) shares: selling an out-of-the-money put and a covered call. Selling the $40.00 strike put, which is 20% below the current price, offers an 11.19% annualized return if it expires worthless (83% probability), providing a discounted entry point for interested investors. Conversely, a covered call using the $50.00 strike, 1% out-of-the-money, yields an 8.23% return if the stock is called away or a 52.64% annualized income boost if it expires worthless (45% probability), albeit capping upside potential. Notably, the implied volatilities for these options (73% for puts, 65% for calls) are significantly higher than TECH's 41% historical volatility.

Analysis

The analysis of Bio-Techne Corp (TECH) options highlights a significant spread between implied and historical volatility, creating distinct opportunities for investors. Implied volatility in the specified put (73%) and call (65%) contracts is substantially elevated compared to the stock's trailing twelve-month actual volatility of 41%. This premium in option pricing makes selling strategies potentially attractive. For investors interested in acquiring the stock, selling the $40.00 strike put, which is 20% out-of-the-money, presents a method to establish a position at an effective cost basis of $39.35 or generate an 11.19% annualized return if the option expires worthless, an outcome with a stated 83% probability. Conversely, for current shareholders, selling the $50.00 strike covered call offers a way to generate income, providing a total return of 8.23% if the stock is called away or a 52.64% annualized yield boost if it expires worthless. However, this strategy caps upside potential just 1% above the current share price of $49.71.

Key Decisions for Investors

• For investors bullish on TECH but seeking a lower entry point, consider selling the $40.00 strike put to either acquire shares at a 20% discount or collect an 11.19% annualized premium.
• Current shareholders of TECH could evaluate selling the $50.00 strike covered call to capitalize on the high implied volatility, generating substantial income while accepting a cap on near-term price appreciation.
• Investors should recognize that the elevated implied volatility (65-73%) relative to historical volatility (41%) suggests the market is pricing in higher-than-average price swings, creating an opportunity for premium sellers but also signaling potential near-term turbulence.