As SoFi Technologies (NASDAQ:SOFI) continues its upward trajectory, investors are eyeing a potential move into the mid-to-high-teens by the end of 2024, possibly reaching $20 by Christmas. For those with a higher risk tolerance, exploring options could be a lucrative way to leverage SoFi’s anticipated next leg up.
Recap of November’s SOFI Stock Recommendation
In a previous discussion last November, three active options were highlighted as a means to generate income, with a particular focus on SoFi. Despite reporting impressive earnings, the stock was selected for its potential to reach 14 million users on the platform, translating to future profits. The suggested option was the Feb. 16 $5 put with a $0.29 bid price, offering an annualized yield of 23%. With a little over two weeks to expiration, those who sold these puts are likely to pocket the income, given the current bid price of just $0.01.
New Play for SoFi: Looking Ahead
Considering the recent suggestions by Barchart.com’s Mark Hake, selling puts for the Feb. 16 $8.50 and $8 strikes are proposed. With bid prices at $0.20 and $0.10, respectively, these options offer annualized yields of 47.2% and 23.6%. However, duplicating this trade every 17 days might be challenging, prompting a longer-term approach spanning six to nine months.
Call and Put Options for the Future
Looking further out, between six and nine months, presents an opportunity for buying a call and selling a put. For the call option, the Sept. 20 $15 call is suggested, with an ask price of $0.59, a down payment of 3.9%, and 234 days to expiration. Conversely, the $9 put has a bid price of $1.60, providing an annualized yield of 28.1%. The call option entails lower risk, with a maximum loss of $59 per contract compared to a potential $740 for each put contract.
Exploring a Collar Strategy
An alternative strategy is to implement a “collar,” involving buying the actual stock, selling an out-of-the-money call, and buying an out-of-the-money put with the same expiration and number of contracts. Using the Sept. 20 expiration date as an example, selling the $15 call with a bid price of $0.50 and buying the $6 put with a $0.49 ask price could provide a balanced approach.
This collar strategy results in a breakeven at $8.91, a maximum profit of $6.09 per share, and a maximum loss of $2.91 per share. This approach is suitable when uncertain about the near-term direction of the stock but confident in its long-term potential.
Despite potential short-term fluctuations, the long-term outlook for SoFi remains optimistic, making it an intriguing prospect for investors
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