November 21st Options Now Available For Peloton Interactive (PTON)

The article discusses potential options trading strategies for Peloton Interactive Inc (PTON) involving selling put options and covered call strategies. Selling the $7.00 strike put offers a potential 20.71% return on cash commitment (44.73% annualized) if it expires worthless, with a 64% probability of that occurring, while a covered call strategy at the $9.00 strike could yield 38.76% if the stock is called away, but only a 12.36% boost (26.69% annualized) if it expires worthless, with a 52% probability of that occurring. The implied volatility for the put and call options are 93% and 91% respectively, while the trailing twelve month volatility is 85%.

Analysis

The provided financial analysis details two options trading strategies for Peloton Interactive Inc. (PTON), which currently trades at $7.12 per share. The first strategy involves selling-to-open a put contract at a $7.00 strike price, with a current bid of $1.45. This action commits the seller to purchase PTON shares at $7.00 if the option is exercised, but the collected premium reduces the effective cost basis to $5.55 per share, representing an attractive entry point for investors interested in PTON. This $7.00 strike is approximately 2% out-of-the-money, and analytical data suggests a 64% probability of the put expiring worthless. If it does, the premium represents a 20.71% return on the cash commitment, or an annualized 44.73% YieldBoost. The second strategy is a covered call, involving purchasing PTON shares at $7.12 and selling-to-open a call contract at a $9.00 strike price, with a current bid of 88 cents. This commits the seller to sell shares at $9.00 if exercised, potentially yielding a total return of 38.76% by the November 21st expiration if called away. The $9.00 strike is approximately 26% out-of-the-money, with a 52% probability of expiring worthless. If the call expires worthless, the premium provides a 12.36% boost to return, or a 26.69% annualized YieldBoost. Notably, implied volatility for the put and call examples are 93% and 91% respectively, which are elevated compared to PTON's actual trailing twelve-month volatility of 85%. This higher implied volatility contributes to the richer option premiums observed and reflects the market's expectation of price swings, aligning with the 'speculative' tone and 'moderately positive' sentiment associated with these strategies.

Key Decisions for Investors

• Investors bullish on Peloton or seeking to acquire shares at a net cost basis of $5.55 (a discount to the current $7.12 price) could consider selling the $7.00 strike put, which offers a potential 20.71% return if it expires worthless, supported by a 64% probability and elevated implied volatility.
• Current PTON shareholders aiming to generate income or achieve a specific exit price could evaluate selling the $9.00 strike covered call, which offers a 12.36% income boost if it expires worthless (52% probability) or a 38.76% total return if shares are called away by the November 21st expiration, though this caps upside if the stock price significantly exceeds $9.00.
• Given the high implied volatilities (91-93%) relative to historical volatility (85%), investors should recognize that while option premiums are attractive for sellers, this also indicates significant expected price movement; thorough due diligence on PTON's fundamentals and individual risk tolerance is essential before engaging in these speculative strategies.
• Investors should monitor the changing probabilities of these options expiring worthless, as tracked by Stock Options Channel, to potentially adjust their positions or risk management strategies over the life of the contracts.