February 2026 Options Now Available For Blackstone Mortgage Trust (BXMT)

The note outlines two option strategies on Blackstone Mortgage Trust (BXMT, current price $20.25): selling a put at the $18 strike (bid $0.05) which would set an effective purchase basis of $17.95 and is ~11% out-of-the-money with a 78% chance to expire worthless, delivering a 0.28% return (1.58% annualized) if it does. The covered-call example sells the $21 strike (bid $0.05), ~4% out-of-the-money, offering a 3.95% total return if called at the Feb 2026 expiration and a 61% chance to expire worthless, yielding a 0.25% boost (1.41% annualized). Implied volatilities are 39% on the put and 30% on the call versus a trailing 12-month volatility of 24%; Stock Options Channel will track odds and contract history over time.

Analysis

Market structure: Small option premia (5¢) on BXMT $18 put and $21 call show a low-vol, income-looking market where option sellers (income funds, retail) win if rates stay stable; BXMT equity holders and leveraged mortgage REITs are vulnerable if rates spike because financing costs and NAV sensitivity will compress equity values. The 11% OTM put with 78% OTM probability and the 4% OTM call with 61% OTM probability imply the market prices modest near-term directional risk but a skew toward downside protection (put IV 39% vs call IV 30%).

Risk assessment: Tail risks include a rapid 200–300bp move higher in 10y Treasury yields, a concentrated financing shock or dividend cut that could drop BXMT NAV >20%, or sudden illiquidity in mortgage-backed assets. Short-term (days–months) outcomes hinge on Fed guidance and 10y moves; medium/long-term (quarters) depend on leverage, asset-liability mismatches and prepayment/default trends. Hidden dependencies: mark-to-market of CRE pools, repo availability and dividend sustainability are second-order failure points.

Trade implications: Income-focused trades (sell OTM puts/covered calls) offer tiny annualized yields (~1.4–1.6%) and are appropriate only as small, patient allocations if willing to own stock at $17.95; prefer selling nearer-term expirations to improve annualized carry. If bearish, use defined-risk put spreads (e.g., 20/16 3–6m) or short BXMT vs a less-levered mortgage REIT to capture relative weakness; hedge with duration shorts if 10y > +50bp.

Contrarian angle: The market is underpricing the cost of leverage and dividend risk—5¢ premium does not compensate for a >10% gap risk on financing shocks. If 10y yields retreat by 75–100bp, BXMT upside could outstrip covered-call caps; conversely, a modest rate shock will make put sellers owners at unattractive basis. Historical parallels (2020 MBS stress) show rapid repricing, so size option-sale exposure conservatively.

Key Decisions for Investors

• Sell-to-open BXMT Feb 2026 $18 puts sized to 1%–2% of portfolio only if you are willing to be assigned at $17.95; set a hard rule to close or roll if BXMT < $18 or implied vol lifts > +25 pts from today (protect against volatility gap risk).
• Establish a covered-call income sleeve: buy BXMT up to 1%–3% portfolio at <= $20.25 and sell Feb 2026 $21 calls for ~5¢ to target ~3.95% capped return; take profit or roll if stock rises >10% or cut position if it falls >10% from entry.
• If bearish on mortgage REITs, initiate a defined-risk put spread on BXMT (buy 20 / sell 16 put spread, 3–6 month) sized 0.5%–1% portfolio to limit downside while retaining meaningful payoff if rates spike >100bp; close at 30%–50% of max gain.
• Reduce broader mortgage-REIT exposure by 25% if the 10-year Treasury yield increases >50bp within 60 days; redeploy proceeds into short-duration credit (e.g., BKLN or VCSH) or floating-rate loan ETF to protect against duration/financing risk.