This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Use Options For a Chance To Buy BAH at a 15% Discount

Looking back to 68 days ago, Booz Allen Hamilton Holding Corp. (BAH) priced a 11,000,000 share secondary stock offering at $17.00 per share. Buyers in that offering made a considerable investment into the company, expecting that their investment would go up over the course of time and based on early trading on Tuesday, the stock is now 10.7% higher than the offering price.

Investors who did not participate in the offering but would be a buyer of BAH at a cheaper price, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the June put at the $16.50 strike, which has a bid at the time of this writing of 55 cents. That would result in a cost basis of $15.95 per share before broker commissions in the scenario where the contract is exercised. If the contract is never exercised, the put seller would still keep the premium, which represents a 3.3% return against the $16.50 purchase commitment, or a 8.1% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

START SLIDESHOW:
Top YieldBoost Puts of of Stocks with Recent Secondaries »

Secondaries can often present buying opportunities for bullish investors interested in purchasing shares, because the sudden extra supply of stock tends to require that the offering be priced at an attractive discount to where the stock had previously been trading before the offering announcement. That can also introduce near-term volatility which improves the premiums a put seller can achieve. Selling a put does not give an investor access to BAH's upside potential the way owning shares would, because the put seller only ends up owning shares in the scenario where the contract is exercised. The chart below shows the one year performance of BAH shares, versus its 200 day moving average:

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs