NovaGold Resources: Selling Puts as a Strategy for Investors

Investors eyeing NovaGold Resources Inc. may consider selling put options at a $4 strike, yielding significant annualized returns. This approach mitigates risks while providing potential earnings for cautious investors.

Date: 23-04-2025

AI Rating: 6

Overview of NovaGold Resources Inc. Put Strategy
NovaGold Resources Inc. has attracted the interest of investors due to its current stock price of $4.59. A valuable strategy for cautious investors is selling put options, specifically the December contract with a $4 strike price. The current bid for this put option stands at 45 cents, indicating a potential yield of 17.1% annualized when considering the commitment of $4 per share.

Yield and Risk Analysis
Selling a put gives investors an opportunity to earn premiums without outright acquiring shares unless the market price declines significantly. In this case, the put seller would only gain from the premium unless the share price falls by 11.9%, at which point they would incur a cost basis of $3.55 after accounting for the premium. This calculated risk-reward dynamic is attractive for investors seeking returns without significant capital exposure.

Volatility Considerations
NovaGold's share price has exhibited substantial volatility, estimated at 66% over the past year based on the last 250 trading days. High volatility can lead to heightened risk, but it also typically allows for greater potential returns, making this trading strategy appealing for those willing to navigate the market's fluctuations.

Investor Outlook
For investors holding a short to mid-term (1 to 3 months) view, the put selling strategy captures value without creating exposure to the downside unless the stock is exercised. This could represent a significant opportunity, depending on whether investors believe the stock will remain stable or appreciate in value.

Stocks: NG