Investors eyeing a purchase of Paylocity Holding Corp (Symbol: PCTY) shares, but tentative about paying the going market price of $44.68/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the May put at the $40 strike, which has a bid at the time of this writing of $1.75. Collecting that bid as the premium represents a 4.4% return against the $40 commitment, or a 17.4% annualized rate of return (at Stock Options Channel we call this the YieldBoost ).
Selling a put does not give an investor access to PCT Paylocity Holding Corp sees its shares fall 10.2% and the contract is exercised (resulting in a cost basis of $38.25 per share before broker commissions, subtracting the $1.75 from $40), the only upside to the put seller is from collecting that premium for the 17.4% annualized rate of return.
Below is a chart showing the trailing twelve month trading history for Paylocity Holding Corp, and highlighting in green where the $40 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 May put at the $40 strike for the 17.4% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for Paylocity Holding Corp (considering the last 253 trading day closing values as well as today's price of $44.68) to be 29%. For other put options contract ideas at the various different available expirations, visit the PCTY Stock Options page of StockOptionsChannel.com.
In mid-afternoon trading on Thursday, the put volume among S&P 500 components was 2.31M contracts, with call volume at 2.82M,.