Commit To Purchase Insys Therapeutics At $45, Earn 25.4% Annualized Using Options

Investors eyeing a purchase of Insys Therapeutics ( INSY) stock, but cautious about paying the going market price of $57.67/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the August put at the $45 strike, which has a bid at the time of this writing of $5.60. Collecting that bid as the premium represents a 12.4% return against the $45 commitment, or a 25.4% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

Top YieldBoost Puts of the S&P 500 »

Selling a put does not give an investor access to INSY'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. And the person on the other side of the contract would only benefit from exercising at the $45 strike if doing so produced a better outcome than selling at the going market price. ( Do options carry counterparty risk? This and six other common options myths debunked). So unless Insys Therapeutics Inc sees its shares decline 22.2% and the contract is exercised (resulting in a cost basis of $39.40 per share before broker commissions, subtracting the $5.60 from $45), the only upside to the put seller is from collecting that premium for the 25.4% annualized rate of return.

Below is a chart showing the trailing twelve month trading history for Insys Therapeutics Inc, and highlighting in green where the $45 strike is located relative to that history:

If you liked this article you might like

August's Inexplicable Selloffs Are Here: Cramer's 'Mad Money' Recap (8/17/17)

Alder Shares Plummet Almost 25% Despite Positive Data; Aralez Pops on Patent Victory: Biotech Movers

Opioid Marketing Under Bipartisan Investigation

Depomed, Insys Shares Down After FDA Decision on Endo's Opana ER

Launch of Cannabis ETF May Not Be Best Option for Investors