Selling a put does not give an investor access to ULCC'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 $2 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 Frontier Group Holdings Inc sees its shares decline 56.6% and the contract is exercised (resulting in a cost basis of $1.80 per share before broker commissions, subtracting the 20 cents from $2), the only upside to the put seller is from collecting that premium for the 9.6% annualized rate of return.
Below is a chart showing the trailing twelve month trading history for Frontier Group Holdings Inc, and highlighting in green where the $2 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 January 2027 put at the $2 strike for the 9.6% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for Frontier Group Holdings Inc (considering the last 249 trading day closing values as well as today's price of $4.62) to be 82%. For other put options contract ideas at the various different available expirations, visit the ULCC Stock Options page of StockOptionsChannel.com.
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Also see:
CMPI market cap history Funds Holding RFLR
FFA Insider Buying
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
