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Arrowhead Pharmaceuticals Options Trading Insights

New options for Arrowhead Pharmaceuticals are available, providing investors with premium opportunities and thoughts on pricing strategies. In-depth analysis shows various trading positions to consider.

Date: 
AI Rating:   6

Investors in Arrowhead Pharmaceuticals Inc (Symbol: ARWR) are presented with new options trading as of this week, particularly with notable put and call contracts set to expire on October 18th. The availability of these options allows for various strategic trading opportunities, which may affect stock pricing.

One highlight is the put contract at the $22.00 strike price with a current bid of 55 cents. If an investor opts to sell this put contract, they are agreeing to purchase the stock at $22.00, effectively lowering their cost basis to $21.45 after including the premium earned. This could be particularly appealing for investors looking to enter a position below the current trading price of $22.38 per share.

The fact that this strike is 2% below the current trading price signifies the potential risk of the put contract expiring worthless, with a 60% probability of this occurrence. This information might influence investor sentiment, as a worthless expiration would yield a 2.50% return on the cash commitment, equating to a 23.40% annualized return, known as the YieldBoost.

On the calls side, there exists a contract at the $24.00 strike price with a bid of 75 cents. If shares are purchased at $22.38, selling this covered call could mean a total return of 10.59% if the stock price reaches $24 at expiration. However, there lies a risk of leaving potential upside untapped if the stock rises significantly beyond this strike.

The call contract represents a 7% premium over the current price and bears a 54% chance of expiring worthless, permitting the investor to retain shares alongside the collected premium. If this were to occur, it could yield a 3.35% additional return or an annualized 31.36% as a YieldBoost.

Implied volatility figures show a high 97% for the put contracts and 80% for call contracts, which is notable compared to the actual trailing twelve-month volatility of 67%. Such volatility insights could indicate expected price movement and investor sentiment towards ARWR stock.

Stocks:  ARWR