Looking back to 134 days ago, Horsehead Holding Corp (Symbol:
ZINC) priced a 5,500,000 share secondary stock offering at $12.00
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 Friday, the stock
is now 48% higher than the offering price.
Investors who did not participate in the offering but would be a
buyer of ZINC 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
$10 strike, which has a bid at the time of this writing of 5 cents.
That would result in a cost basis of $9.95 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 0.5% return against the $10.00 purchase
commitment, or a 1.7% 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 ZINC'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 ZINC
shares, versus its 200 day moving average:
Looking at the chart above, ZINC's low point in its 52 week range
is $9.38 per share, with $18.83 as the 52 week high point - that
compares with a last trade of $18.00.
According to the ETF Finder at ETF Channel, ZINC makes up 1.24% of
the SPDR S&P Metals and Mining ETF (Symbol: XME) which is
trading lower by about 1.7% on the day Friday.
Top YieldBoost Puts of of Stocks with Recent