Bloom Energy Explores Put Options Amid Stock Price Caution

A report suggests that investors eyeing Bloom Energy Corp (BE) shares may consider selling put options instead of purchasing at the current market price of $9.83. The January 2026 put at a $5 strike offers a 12.4% annualized return, raising interest among cautious investors.

Date: 31-10-2024

AI Rating: 6

This report discusses a strategy around buying shares of Bloom Energy Corp (BE) at the current market price of $9.83. It highlights the alternative strategy of selling put options, specifically mentioning a January 2026 put option at a $5 strike price. The bid for this option is currently 75 cents, which translates to a 12.4% annualized rate of return for investors if they opt for this strategy.

While selling put options could provide a reasonable return, it does not offer the same upside potential as directly owning shares. The risk for the put seller is that they only benefit from the premium unless the contract is exercised, which would only happen should BE’s stock decline significantly. If the stock price falls 49.4% and the contract is exercised, it would yield a cost basis of $4.25 per share after taking the premium into account.

The volatility of the stock, calculated at 70%, introduces a substantial factor for investors considering this strategy. High volatility suggests that the stock price could fluctuate significantly, which makes the potential obligations under the put contract an important consideration. The impact of this volatility on both the strategy of selling puts and on the stock price could lead investors to weigh the benefit of the potential yield against the risk of stock depreciation.

Stocks: BE