Investors Analyze PCG Options Amidst Market Tentativeness

In a recent report, investors consider alternative strategies for PG&E Corp (PCG) shares, particularly focusing on selling puts. The current market price is $19.84/share, and the projected returns reveal potential concerns which could affect stock prices.

Date: 01-10-2024

AI Rating: 5

The report discusses alternative investment strategies for PG&E Corp (Symbol: PCG), particularly focusing on selling put options. The current market price for PCG stands at $19.84 per share. A noteworthy put contract mentioned is the January 2026 put at a $15 strike, which offers a bid of 45 cents, translating to a 3% return against the $15 commitment, or a 2.3% annualized yield. This yield is significantly higher than the 0.2% annualized dividend yield paid by PG&E, indicating potential risk-reward advantages of selling puts instead of outright share ownership.

The analysis states that selling puts does not permit investors to benefit from the stock’s upside unless the contract is exercised, which, in this case, would require a drop of approximately 24.5% in share prices. If the stock declines to $15, the effective cost basis for the put seller would be $14.55, before commissions, which would suggest a significant downside risk compared to buying the stock outright.

An important consideration noted is the unpredictable nature of dividend payments, which are contingent upon the company’s profitability. Due to this volatility, investors should be cautious in assuming that the current dividend yield is sustainable. The report points out that if the stock price were to fall to the $15 strike price, it would represent a considerable decline of 24.47%, emphasizing the risks involved in dividend expectations.

The report also provides insight into the historical volatility of PG&E shares, citing a 20% volatility based on previous trading values. This information could help investors weigh their options regarding the put sale against potential stock price movements.

Stocks: PCG