Arcutis Biotherapeutics: Puts Strategy for Tentative Investors

Investors eyeing Arcutis Biotherapeutics Inc at $14.21 may explore selling a January 2027 put at a $7.50 strike for a potential 10.6% annualized return. This strategy may reduce exposure while providing income in uncertain market conditions.

Date: 10-01-2025

AI Rating: 6

The text presents a trade strategy for investors considering the stock of Arcutis Biotherapeutics Inc (ARQT). Selling a put contract at a $7.50 strike for January 2027 looks tempting, especially with a bid premium of $1.60, offering a 10.6% annualized yield. This approach can serve as an intriguing alternative to outright purchasing shares.

Market Price and Risk Analysis: Currently, ARQT's market price is at $14.21, indicating a significant cushion as the strike price for the put contract is set at $7.50. Investors need to weigh the potential downside risk; should shares fall by 47%, the put would be exercised, forcing them to buy the stock effectively at $5.90 (after accounting for the premium received). This highlights the importance of understanding the associated risks when engaging in options trading.

A notable factor to consider is the stock's high historical volatility of 81%, based on the previous year’s trading performance. This elevated volatility suggests that options might be more appealing for those looking to capitalize on potential price swings rather than direct ownership. Selling the put might be an attractive strategy, given the substantial premium relative to the strike price.

Stocks: ARQT