Interesting SRPT Put And Call Options For September 19th

Analysis of Sarepta Therapeutics Inc (SRPT) options reveals potential strategies for investors. Selling a $20 put contract offers a possible 6.75% return if it expires worthless, while a covered call strategy at the $25 strike could yield 21.08% if the stock is called away, but only a 8.97% return if the calls expire worthless. Stock Options Channel data suggests a 70% probability of the put expiring worthless and a 47% probability of the call expiring worthless, with implied volatilities of 107% and 102% respectively, compared to a trailing twelve month volatility of 91%.

Analysis

The article outlines two distinct options strategies for Sarepta Therapeutics Inc (SRPT), which is currently trading at $22.30 per share. For investors considering acquiring shares at a lower price, selling the $20.00 strike put contract with a current bid of $1.35 offers an effective cost basis of $18.65 if the shares are assigned, representing an approximate 10% discount from the current stock price. Analytical data indicates a 70% probability of this put expiring worthless, which would result in a 6.75% return on the cash commitment, or 26.21% annualized, before broker commissions. Conversely, for investors holding or acquiring SRPT shares, a covered call strategy involves selling the $25.00 strike call option, with a current bid of $2.00. If the stock is called away at the September 19th expiration, this strategy could yield a total return of 21.08% (excluding dividends and before commissions). The $25.00 strike is roughly 12% above the current trading price. There is a 47% assessed probability of this call contract expiring worthless, in which case the investor retains their shares and the collected premium, translating to an 8.97% additional return, or 34.82% annualized. Notably, the implied volatility for the put contract is 107% and for the call contract is 102%, both significantly higher than SRPT's actual trailing twelve-month volatility of 91%, suggesting elevated market expectations for price fluctuations or richer premiums for option sellers.

Key Decisions for Investors

• Investors bullish on SRPT but seeking a more attractive entry point might consider selling the $20.00 strike put, which offers a potential acquisition cost of $18.65 per share or a 6.75% return on cash if the option expires worthless.
• Shareholders of SRPT, or those contemplating a purchase at $22.30, could evaluate selling the $25.00 strike covered call to generate income, potentially achieving a 21.08% return if the stock is called away by September 19th, or an 8.97% premium yield if the option expires worthless, while being mindful that this strategy caps upside potential above $25.00.
• The elevated implied volatilities of 107% for puts and 102% for calls, compared to the 91% historical volatility, signal potentially lucrative premiums for option sellers but also indicate higher perceived market risk and expectations of significant price movement in SRPT, warranting careful risk assessment before implementing these strategies.