Small and large investors in dividend stocks can use covered calls and puts trades to generate monthly income from options premiums and options trading.
There is an 18% chance that PAYC will close below $250 on Nov. 17, 2023, according to the PAYC put options market.
There is a 17% chance that PAYC will close above $360 on Nov. 17, 2023, according to the PAYC call options market.
So if my PAYC 8.18.2023 $330 strike puts are exercised, I can sell PAYC 11.17.2023 $320 calls for about $12.80 and make money on the trade if my puts and calls trades are exercised.
The risk is that PAYC will fall to $270 or lower.
Do I take my $3,760 loss now or try to make $2,800 on the trade?
Pipper Sanders' target price is $399, BMO Capital $356, Credit Suisse $395, Barclays $350.
I tried to buy the puts back for $39.50. No luck. After reviewing analysts' target prices, I cancelled the order.
On July 3, Goldman Sachs made a big deal about its "Rule of 10" stocks, which it says will be the big grower for several more years.
PAYC was on the list. Last week I sold PAYC August $330 strike puts. Today it closed at about $299.
This hasn't been a good week.
The big fail for me in the Q2 earnings report was the 87% drop in free cash flow, the valuation metric that I and a lot of others use in valuing stocks.
I think the 3-day rule is order. I'm waiting three days to see how analysts and the stock respond the the Q2 results and guidance.
Often when stocks plunge after an earnings report, the drop lasts longer than a few days.
People who still have profits on the stock may take profits or hold on for the longer term. Those who hold many sell covered calls on PAYC.
If investors sell covered calls, they'll get high options prices because the stock's implied volatility is high.
Just like high prices, high options prices suggest high risk.
So PAYC is now a high risk stock, and it's no longer an 88% buy on Barchart.com. It is a hold.
Morningstar.com lowers its fair value estimate for PAYC to $370 from $388. https://www.morningstar.com/stocks/paycom-earnings-firm-posts-mixed-results-amid-module-conversion-headwinds
Analysts’ Opinions Are Mixed on These Technology Stocks: Paycom (PAYC), Pinterest (PINS) and Alight (ALIT). https://www.tipranks.com/news/blurbs/analysts-opinions-are-mixed-on-these-technology-stocks-paycom-payc-pinterest-pins-and-alight-alit
Anallysts' top technology picks on 8.2.2023: AMD, PAYC. https://www.tipranks.com/news/blurbs/analysts-top-technology-picks-advanced-micro-devices-amd-paycom-payc
There is an 18% chance that PAYC will close below $250 on Nov. 17, 2023, according to the PAYC put options market.
There is a 17% chance that PAYC will close above $360 on Nov. 17, 2023, according to the PAYC call options market.
So if my PAYC 8.18.2023 $330 strike puts are exercised, I can sell PAYC 11.17.2023 $320 calls for about $12.80 and make money on the trade if my puts and calls trades are exercised.
The risk is that PAYC will fall to $270 or lower.
Do I take my $3,760 loss now or try to make $2,800 on the trade?
Pipper Sanders' target price is $399, BMO Capital $356, Credit Suisse $395, Barclays $350.
I tried to buy the puts back for $39.50. No luck. After reviewing analysts' target prices, I cancelled the order.
On July 3, Goldman Sachs made a big deal about its "Rule of 10" stocks, which it says will be the big grower for several more years.
PAYC was on the list. Last week I sold PAYC August $330 strike puts. Today it closed at about $299.
This hasn't been a good week.
The big fail for me in the Q2 earnings report was the 87% drop in free cash flow, the valuation metric that I and a lot of others use in valuing stocks.
I think the 3-day rule is order. I'm waiting three days to see how analysts and the stock respond the the Q2 results and guidance.
Often when stocks plunge after an earnings report, the drop lasts longer than a few days.
People who still have profits on the stock may take profits or hold on for the longer term. Those who hold many sell covered calls on PAYC.
If investors sell covered calls, they'll get high options prices because the stock's implied volatility is high.
Just like high prices, high options prices suggest high risk.
So PAYC is now a high risk stock, and it's no longer an 88% buy on Barchart.com. It is a hold.