Interesting COCO Put And Call Options For August 15th

Investors in Vita Coco (COCO) have options strategies to consider, including selling put options at the $35 strike, which offers a potential 5.43% return if the contract expires worthless, or 35.38% annualized. Alternatively, selling covered calls at the $40 strike could yield a 14.41% return if the stock is called away, or a 2.93% boost if the contract expires worthless, which translates to 19.07% annualized; the implied volatility for the put and call contracts are 47% and 46%, respectively, while the trailing twelve month volatility is 43%.

Analysis

The provided financial text details two specific options strategies for Vita Coco Co Inc (COCO), which is currently trading at $35.88 per share. For investors interested in acquiring shares, selling a put contract at the $35.00 strike price with a current bid of $1.90 is presented as an alternative. This strategy would result in an effective cost basis of $33.10 per share if assigned, a discount to the current market price. This $35.00 strike is approximately 2% out-of-the-money, and analytical data suggests a 60% probability of this put expiring worthless, which would generate a 5.43% return on the cash commitment, or an annualized "YieldBoost" of 35.38%. For current COCO shareholders, a covered call strategy is outlined, involving selling the $40.00 strike call option, which has a bid of $1.05. If the stock is called away at the August 15th expiration, this would achieve a total return of 14.41% (excluding dividends). This $40.00 strike is approximately 11% out-of-the-money, with a 69% chance of expiring worthless. Should it expire worthless, the investor retains the shares and collects the premium, representing a 2.93% "YieldBoost", or 19.07% annualized. The implied volatility is noted at 47% for the put and 46% for the call, compared to a calculated trailing twelve-month actual volatility of 43%, indicating that option premiums may be slightly elevated relative to recent historical price movements.

Key Decisions for Investors

• Investors seeking to acquire COCO shares below the current market price of $35.88 could consider selling the $35.00 strike put option, which offers a potential entry at an effective cost of $33.10 or a 5.43% cash-on-cash return if the option expires unexercised.
• Current COCO shareholders aiming to generate income or target a specific exit price could evaluate selling the $40.00 strike covered call, potentially realizing a 14.41% return if the stock is called away by the August 15th expiration, or securing a 2.93% premium if the option expires worthless, though this caps upside potential.
• The observed implied volatilities of 47% for the put and 46% for the call, being slightly above the 43% trailing actual volatility, suggest that option selling strategies for COCO might currently offer comparatively richer premiums, potentially favoring sellers.
• Before implementing these strategies, investors should carefully assess the stated probabilities of the options expiring worthless (60% for the put, 69% for the call) in conjunction with their own fundamental analysis and risk appetite for Vita Coco Co Inc.