Investors eyeing a purchase of Stamps.com Inc. (STMP - Get Report) shares, but cautious about paying the going market price of $31.21/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the November put at the $25 strike, which has a bid at the time of this writing of $1.10. Collecting that bid as the premium represents a 4.4% return against the $25 commitment, or a 8.7% annualized rate of return (at Stock Options Channel we call this the YieldBoost).Selling a put does not give an investor access to STMP'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 $25 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 Stamps.com Inc. sees its shares decline 20.1% and the contract is exercised (resulting in a cost basis of $23.90 per share before broker commissions, subtracting the $1.10 from $25), the only upside to the put seller is from collecting that premium for the 8.7% annualized rate of return. Below is a chart showing the trailing twelve month trading history for Stamps.com Inc., and highlighting in green where the $25 strike is located relative to that history: The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the November put at the $25 strike for the 8.7% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for Stamps.com Inc. (considering the last 252 trading day closing values as well as today's price of $31.21) to be 41%. For other put options contract ideas at the various different available expirations, visit the STMP Stock Options page of StockOptionsChannel.com. In mid-afternoon trading on Thursday, the put volume among S&P 500 components was 673,226 contracts, with call volume at 673,226, for a put:call ratio of 0.72 so far for the day, which is above normal compared to the long-term median put:call ratio of .65. In other words, if we look at the number of call buyers and then use the long-term median to project the number of put buyers we'd expect to see, we're actually seeing more put buyers than expected out there in options trading so far today. Find out which 15 call and put options traders are talking about today.
More from Stocks
Dow Futures Flat, Global Stocks Retreat As China Notches Weakest GDP in 30 Years
Global stocks retreated Friday after China posted its weakest quarterly economic growth rate in three decades, underscoring investor concern for a trade-related slowdown in major markets around the world and re-centering focus on the fate of ongoing trade talks between Washington and Beijing.
China's Slowing Economy Renews US Trade Deal Focus, But Who Has the Upper Hand?
China's worrying economic slowdown, the steepest in three decades, puts renewed focus on the fate of trade talks with the United States and the chances of a tariff roll-back as the two sides look to end more than year of commercial and political hostilities.
Coca-Cola, Weak China Growth, AT&T, GM, Aramco IPO - 5 Things You Must Know
U.S. stock futures decline Friday after China posts its weakest quarterly economic growth rate in nearly three decades; Coca-Cola, Schlumberger and American Express reports earnings; AT&T is discussing with Elliott Management issues raised by the activist investor.
J&J, Morgan Stanley, Coca-Cola and More - Biggest Earnings for This Week
Here's list of key companies reporting earnings the week of October 14, 2019.