Interesting TWST Put And Call Options For December 19th

The article details two options strategies for Twist Bioscience Corp (TWST) shares, currently trading at $29.89. A cash-secured put strategy, selling the $27.50 strike for $0.50, offers an effective entry price of $27.00 with a 69% chance of expiring worthless, yielding an annualized 10.53%. Alternatively, a covered call strategy, selling the $35.00 strike for $1.45 against owned shares, could generate a 21.95% return by December 19th if called away, or an annualized 28.09% "YieldBoost" if the call expires worthless (54% probability). The analysis also highlights implied volatilities of 89-94% compared to TWST's 63% historical volatility.

Analysis

Twist Bioscience Corp (TWST), currently trading at $29.89, presents two distinct options strategies for investors to consider. A cash-secured put strategy, selling the $27.50 strike for $0.50, offers an effective entry price of $27.00 if assigned, representing an 8% discount to the current market price. This strategy yields an annualized 10.53% if the put expires worthless, an event with a 69% probability.

Alternatively, a covered call strategy involves selling the $35.00 strike for $1.45 against owned shares. This could generate a total return of 21.95% by December 19th if the stock is called away. If the call expires worthless, which has a 54% probability, it offers an annualized "YieldBoost" of 28.09%.

A notable discrepancy exists between implied and historical volatility for TWST options. Implied volatilities for the put and call contracts are 89% and 94% respectively, significantly higher than the trailing twelve-month historical volatility of 63%. This suggests that options premiums are elevated, potentially offering attractive income generation opportunities for sellers.

These strategies allow investors to either target a lower entry point for TWST shares or generate income from existing holdings. The probabilities of options expiring worthless provide a quantitative basis for assessing the likelihood of premium retention versus assignment.

Key Decisions for Investors

• Consider utilizing a cash-secured put strategy on TWST at the $27.50 strike to potentially acquire shares at a discounted effective cost basis of $27.00, while earning a 10.53% annualized return if the option expires worthless.
• For existing TWST shareholders, evaluate implementing a covered call strategy using the $35.00 strike to generate an annualized 28.09% YieldBoost, accepting a capped upside of 21.95% if shares are called away by December 19th.
• Investors should account for the elevated implied volatility (89-94%) compared to historical volatility (63%), which may present opportunities for premium collection but also implies higher expected price fluctuations for TWST.