Looking back to 9 days ago, Hilton Worldwide Holdings Inc
(Symbol: HLT) priced a 90,000,000 share secondary stock offering at
$22.50 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
Thursday, the stock is now 6% higher than the offering price.
Investors who did not participate in the offering but would be a
buyer of HLT 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 January 2015 put
at the $22 strike, which has a bid at the time of this writing of
70 cents. That would result in a cost basis of $21.30 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 3.2% return against the
$22.00 purchase commitment, or a 5.9% annualized rate of return (at
Stock Options Channel we call this the
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 HLT'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 HLT
shares, versus its 200 day moving average:
Looking at the chart above, HLT's low point in its 52 week range is
$20.55 per share, with $25.95 as the 52 week high point - that
compares with a last trade of $24.14.
According to the ETF Finder at ETF Channel, HLT makes up 2.39% of
the First Trust US IPO Index Fund ETF (Symbol: FPX) which is
trading higher by about 0.1% on the day Thursday.
Top YieldBoost Puts of of Stocks with Recent