Interesting EXAS Put And Call Options For November 21st

The article details two options strategies for Exact Sciences (EXAS), currently at $47.60, offering potential yield enhancement or discounted share acquisition. Selling a cash-secured put at the $37.50 strike, 21% out-of-the-money, could yield 13.36% annualized with an 80% chance of expiring worthless, targeting a $36.25 effective cost basis. Alternatively, a covered call at the $55.00 strike, 16% out-of-the-money, offers an 18.70% total return if called away, or a 12.63% annualized premium if it expires worthless (64% probability), effectively boosting yield on existing EXAS holdings.

Analysis

The provided information details two distinct options strategies for EXACT Sciences Corp. (EXAS), currently trading at $47.60 per share, designed to either generate income or establish a position at a discount. The first strategy involves selling a cash-secured put at the $37.50 strike, which is approximately 21% out-of-the-money. This approach provides the seller with a $1.25 premium, lowering the effective purchase price to $36.25 if assigned, or generating a 13.36% annualized yield if the option expires worthless, an event with a stated 80% probability. The second strategy is a covered call for existing shareholders, selling the $55.00 strike call for a $1.50 premium. This caps the total potential return at 18.70% if the stock is called away but provides a 12.63% annualized yield boost if the option expires worthless, which has a 64% probability. A key data point is the discrepancy in volatility metrics: the implied volatility for the put contract is high at 73%, significantly above the call's 56% and the stock's actual trailing twelve-month volatility of 52%. This volatility skew suggests the options market is pricing in a greater probability of a significant downside move, thereby increasing the premium compensation for sellers of puts.

Key Decisions for Investors

• Investors bullish on EXAS but awaiting a lower entry point could sell the $37.50 cash-secured put to either acquire shares at a potential cost basis of $36.25 or generate a 13.36% annualized yield.
• Current shareholders seeking to enhance returns could implement a covered call strategy at the $55.00 strike, which offers a 12.63% annualized premium yield while capping total return at 18.70% if the stock appreciates past the strike.
• Traders should note that the put's elevated implied volatility of 73%, compared to the 52% historical volatility, offers attractive premium but also signals that the market is pricing in a heightened risk of a near-term price decline.