Interesting VKTX Put And Call Options For September 5th

The article outlines two options strategies for Viking Therapeutics (VKTX) at its current $34.53 trading price. Selling a $31.00 strike put contract for a $2.07 premium offers a potential 56.68% annualized return if it expires worthless, or a $28.93 effective cost basis if assigned. Alternatively, a covered call strategy using the $35.00 strike, with a $3.15 premium, could yield 10.48% if shares are called away by September 5th, or an annualized 77.44% premium gain if it expires worthless. These strategies highlight potential income generation, noting implied volatilities of 112% and 126% respectively, against VKTX's 76% trailing 12-month volatility.

Analysis

The options market for Viking Therapeutics (VKTX) indicates elevated implied volatility, creating opportunities for premium-generating strategies. The analysis presents two distinct scenarios based on a current share price of $34.53. Firstly, selling a cash-secured put at a $31.00 strike yields a $2.07 premium, effectively lowering the acquisition cost basis to $28.93 if assigned. This represents an attractive entry point for investors already interested in owning the stock, with a 63% probability of the contract expiring worthless, which would generate a 56.68% annualized return on the cash commitment. Secondly, for existing shareholders, a covered call strategy at a $35.00 strike for a $3.15 premium offers a potential total return of 10.48% if the shares are called away by the September 5th expiration. Critically, the implied volatility in these contracts (112% for the put, 126% for the call) is substantially higher than the stock's 76% trailing twelve-month historical volatility. This discrepancy suggests the market is pricing in a significantly larger future price swing for VKTX than what has been observed over the past year, which explains the rich premiums available.

Key Decisions for Investors

• Investors bullish on VKTX but seeking a lower entry point could sell the $31.00 strike put to either acquire shares at an effective cost of $28.93 or earn a 56.68% annualized yield if the option expires worthless.
• Current VKTX shareholders could consider writing the $35.00 strike covered call to generate income, realizing a 77.44% annualized yield from the premium if the stock price remains below the strike, but must accept a capped upside and the obligation to sell shares at $35.00.
• Given the significant premium of implied volatility (112%-126%) over historical volatility (76%), investors should recognize that the high option yields reflect market expectations of a major price move and should position according to their tolerance for such binary outcomes.