Interesting LC Put And Call Options For March 20th

LendingClub (LC) trades at $20.31. Selling the $20 put (bid $0.40) sets an effective purchase price of $19.60, with a 57% probability to expire worthless and a 2.00% one-period return (11.41% annualized) if it does. Alternatively, selling a covered call at $21 (bid $0.20) on shares produces a 4.38% return if called, with a 49% chance to expire worthless (0.98% one-period, 5.62% annualized). Implied volatility on both contracts is ~69% versus a trailing 12‑month volatility of 57%, framing these as yield-boosting option strategies with defined downside/upside trade-offs.

Analysis

Contrarian angles: The market is under-pricing the assignment risk and funding/credit tail correlation — put sellers capture ~11.4% annualized YieldBoost but may become concentrated owners if credit deteriorates. Conversely, near-term IV appears ~12 vol points rich to realized; disciplined short-dated selling (with tail hedges) may be underexploited if no negative credit surprise occurs. Historical parallels (post-QE fintech repricings) show 20–30% swings around credit-cycle inflection points; unintended consequence: heavy put-selling could create forced concentration and execution risk on assignment, so cap exposure and set concrete roll/assignment rules.

Key Decisions for Investors

• Sell cash-secured LC Mar20 $20 puts to collect $0.40 (effective basis $19.60); limit total notional to establish a 1–3% portfolio equity weight in LC and close/roll if LC < $18 or IV rises >+15 pts.
• Establish a covered-call sleeve: buy LC up to 2% portfolio weight and sell Mar20 $21 calls for $0.20 to lock 0.98% immediate yield (4.38% if called); take profits at $21 or cut at $19.50.
• If selling premium broadly, short 30–45 day options (puts or strangles) size-limited and pair with bought protective puts (2–3 pts OTM) as tail insurance; terminate short-vol exposure if unemployment claims jump +0.3% MoM or 30-day charge-offs accelerate >100bps.
• Monitor three near-term catalysts over 30–90 days — LC monthly charge-off trends, next earnings/loan-performance update, and US CPI/unemployment prints — and reduce options/net exposure immediately if any two show directional deterioration beyond stated thresholds.