September Puts Options Trades on 4 Stocks
By Donald E. L. Johnson
Cautious Speculator
- The initial cash secure puts trades that will expire in September include GNRC, MRNA, NEM and VRTX.
- The average annualized return on risk on these trades is about 18.7%. The stocks’ average dividend yield is about 2.29%.
- Watch the comments section below for reports on additional puts trades.
- Puts trades are bullish and, like all investing and trading, involves risk taking and risk management.
I’ve done cash secured puts options trades on four stocks and bought one puts trade back early. In July, I did 16 puts trades, and I expect to do 15 to 20 puts trades on stocks and exchange traded funds that will expire in September.
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On 8.16.23, Generac Holdings Inc.(GNRC) was at $110.73, I sold GNRC 9.15.23 (29 days) $95 strike puts for $1.00 a share, or $100 per 100-share puts option. Four days later I decided that despite its sharp decline in recent months, it still is over priced. So I bought the puts back for $0.46 and took my $0.54 per share, or $54 per puts option profit. The return on risk (RoR) was 0.488%, or 44.5% annualized. This ARoR calculations assume that a trader can get the same results on similar trades 91 times a year (365/4).
The reason I sold GNRC puts is that I think hurricane season will give the stock it usually gets at this time of year from weather forecasts and disasters. Selling puts is a bullish trade.
On 8.17.23, Vertex Pharmaceuticals Inc.(VRTX) was at $344.98 a share. I sold VRTX 9.15.23 $320 strike puts for $1.90 a share. The RoR is 0.551, or 7.180% annualized. The delta was -.15. OTM probability was 82.67% and implied volatility was 26.82%.
Analysts rate VRTX a strong buy, or a 4.42 out of a possible 5 rating. Their high target price is $456 a share. The mean target is $381.91 and the low target is $315.
I’ve been in and out of VRTX and selling puts and covered calls on it for years. I’m trying to get back into VRTX at a lower price.
Today Moderna Inc.(MRNA) , the covid vaccine maker, was trading at $115.71. I paid $0.01 to get out of my MRNA 8.25.23 puts and sold MRNA 9.15.23 (24 days to expiration) $102 puts for $1.18 per share. The margin of safety or discount if I buy the stock at $102 is 11.845%. That is, the stock would have to drop more than the 11.845% MOS before the stock would be assigned to me at $102 a share.
With new vaccines about to come to the market in a few weeks while covid is staging a bit of a comeback, I expect the stock to stay at current levels or go up. It closed today at $116.24, up $5.16.
The delta on the MRNA trade is .12 while the OTM probability is 86.3% and the IV is a nice high 52.18%. When the IV is high, the puts and calls options prices are high.
Analysts rate MRNA a moderate buy with a 3.69 rating out of a possible 5. Their high target price is $430, the mean is $180.27 and the low target is $68.
Newmont Mining Corp. (NEM) closed today at $38.60. I sold NEM 9.15.23 (24 days) $35 strike puts for $0.20. The RoR is 0.52%, or 7.9% annualized. The dividend yield is about 4.5%. The MOS or discount is a pretty safe 9.02%. The delta is a relatively safe -.12 and the OTM probability is a very safe 86.3%. The IV is a relatively high 30.5%. I also sold covered calls on NEM today.
Analysts rate NEM a relatively strong moderate buy at a 4.31 rating out of a possible 5.
With stocks correcting, I’m being cautious about giving me as much MOS as I can while still generating a decent annualized return on risk. There are no guarantees that this strategy will work as planned and hoped.
Between my weekly portfolio updates, I report my thoughts and trades in the comments section of this and other posts.
I respond to comments on the comments section where readers’ comments are posted. That is, if you have a question about this article or other comments, I'll discuss your questions with you in the comments section below this article.
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On the date of publication, Donald E.L. Johnson had a position in: MRNA, NEM, VRTX. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
