Selling a put does not give an investor access to PODD'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 $210 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 Insulet Corp sees its shares fall 14.9% and the contract is exercised (resulting in a cost basis of $196.80 per share before broker commissions, subtracting the $13.20 from $210), the only upside to the put seller is from collecting that premium for the 10.6% annualized rate of return.
Below is a chart showing the trailing twelve month trading history for Insulet Corp, and highlighting in green where the $210 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 September put at the $210 strike for the 10.6% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for Insulet Corp (considering the last 251 trading day closing values as well as today's price of $246.34) to be 39%. For other put options contract ideas at the various different available expirations, visit the PODD Stock Options page of StockOptionsChannel.com.
In mid-afternoon trading on Friday, the put volume among S&P 500 components was 1.33M contracts, with call volume at 1.33M, for a put:call ratio of 0.73 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.
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Also see:
INZY market cap history SCPD Options Chain
Funds Holding MFUS
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
