Use Options For a Chance To Buy SUI at a 22% Discount

Looking back to 44 days ago, Sun Communities, Inc. (Symbol: SUI) priced a 3,250,000 share secondary stock offering at $65.00 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 Thursday, the stock is now 6.8% above the offering price.

Investors who did not participate in the offering but would be a buyer of SUI 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 2016 put at the $55 strike, which has a bid at the time of this writing of 40 cents. That would result in a cost basis of $54.60 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 0.7% return against the $55.00 purchase commitment, or a 1.4% annualized rate of return (at Stock Options Channel we call this the YieldBoost ).

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 SUI'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 SUI shares, versus its 200 day moving average:

Sun Communities, Inc. Chart

Looking at the chart above, SUI's low point in its 52 week range is $57.64 per share, with $72.92 as the 52 week high point - that compares with a last trade of $69.48.

The current annualized dividend paid by Sun Communities, Inc. is $2.60/share, currently paid in quarterly installments, and its most recent dividend has an upcoming ex-date of 12/29/2015. Below is a long-term dividend history chart for SUI, which can be of good help in judging whether the most recent dividend with approx. 3.7% annualized yield is likely to continue.


According to the ETF Finder at ETF Channel, SUI makes up 1.82% of the PowerShares DWA Financial Momentum Portfolio ETF (Symbol: PFI) which is trading relatively unchanged on the day Thursday.

Top YieldBoost Puts of of Stocks with Recent Secondaries »

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos

    BNK Invest

    BNK Invest Inc. provides investment services and information. BNK Invest owns and operates a market news family of websites including DividendChannel, ETFChannel, StockOptionsChannel, and others, which make up an investor community featuring stock message boards, ratings, research, and strategies. BNK Invest caters to investing firms and individual investors internationally.

    Learn More