First Week of APLS November 21st Options Trading

For Apellis Pharmaceuticals (APLS), currently at $22.98, option strategies offer distinct risk/reward profiles. Selling a $20.00 strike put for 70 cents provides a 20.26% annualized return if it expires worthless (76% probability) or a net acquisition cost of $19.30. Conversely, a covered call strategy using a $25.00 strike call, sold for $1.70, could generate a 16.19% return if assigned by November 21st, or a 42.83% annualized yield if the option expires worthless (55% probability), highlighting opportunities for yield enhancement or discounted entry.

Analysis

The options market for Apellis Pharmaceuticals (APLS), currently trading at $22.98, presents two distinct strategies for investors based on the provided data. The first is a cash-secured put sale at the $20.00 strike, which generates a $0.70 premium. This strategy offers a potential entry point at an effective cost basis of $19.30 per share, a 13% discount to the current market price, should the stock be assigned. Alternatively, if the put expires worthless, which has a stated probability of 76%, the seller would realize a 20.26% annualized return on the cash commitment. The second strategy is a covered call, involving the purchase of APLS shares and the sale of a $25.00 strike call for a $1.70 premium. This yields a potential total return of 16.19% by the November 21st expiration if the stock is called away, but caps upside beyond the $25.00 strike. The option has a 55% probability of expiring worthless, in which case the premium collected would represent a 42.83% annualized yield boost. A key observation is the divergence between the options' implied volatility of approximately 65% and the stock's trailing twelve-month actual volatility of 55%, indicating that options are currently pricing in a higher degree of future price fluctuation than has been realized historically, thereby enhancing the premiums available to option sellers.

Key Decisions for Investors

• Investors bullish on APLS but seeking a lower entry point could consider selling the $20.00 strike put to either acquire shares at an effective 13% discount or generate a 20.26% annualized yield on cash.
• Current shareholders or those initiating a new position could implement the covered call strategy at the $25.00 strike to generate income and target a 16.19% total return, while acknowledging the trade-off of capping upside potential.
• Note that the elevated implied volatility of 65% relative to the 55% historical volatility inflates option premiums, which is favorable for sellers but also signals market anticipation of significant price swings in APLS.