Investors looking to buy shares of Zebra Technologies Corp. (Symbol: ZBRA), but cautious about paying the going market price of $281.68/share, could benefit by considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the August put at the $270 strike, which has a bid at the time of this writing of $19.30. Collecting that offer as the premium represents a 7.2% return on the $270 commitment, or a 21.4% annualized rate of return (at Stock Options Channel we call that the YieldBoost).
Selling a put does not give an investor access to ZBRA’s upside potential like 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 $270 strike if doing so produced a better result than selling at the going market price. (Do options carry counterparty risk? This and six other common options myths debunked). So unless Zebra Technologies Corp. does not see its shares fall 3.6% and the contract is exercised (resulting in a cost base of $ 250.70 per share before broker commissions, subtracting the $ 19.30 from $ 270), the only benefit to the put seller is from collecting that premium. for the 21.4% annual return.
Below is a chart showing the trailing twelve month trading history for Zebra Technologies Corp., and highlighting in green where the $270 strike is located relative to that history:
The chart above, and the historical volatility of the shares, can be a helpful guide in combination with fundamental analysis to judge whether selling the August placed at the strike of $270 for the 21.4% annual reward represents a good reward for the risks. We calculate the trailing twelve month volatility for Zebra Technologies Corp. (taking into account the last 251 trading days closing values and also today’s price of $281.68) to be 42%. For other buying options contracts ideas at the various different expirations available, visit the ZBRA Stock Options page of StockOptionsChannel.com.
In midday trading on Tuesday, put volume among S&P 500 components was 870,714 contracts, with call volume at 1.14M, for a put:call ratio of 0.77 so far for the day, which is unusually high compared to the long term. median put:call ratio of .65. In other words, there are far more buyers in options trading thus far than would normally be seen, compared to call buyers. Find out which 15 call and put options traders are talking about today.
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See also:
• Best Stocks Held By Ray Dalio
• Historical Share Prices of HYZD
• Funds Holding AVAC
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.