This is crazy 🤯
Someone is willing to pay me about $1,150 to agree to buy 100 shares of $Marvell Technology(MRVL)$ at $150 by January 15.
It's called a cash-secured put. Here's how it works:
📌 The setup
Marvell is trading around $166.
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Sell one $150 put expiring January 15
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Collect approximately $11.50 per share
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Receive $1,150 upfront
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Set aside $15,000 in cash to cover the potential purchase of 100 shares at $150
You get paid immediately for taking on the obligation to buy the shares if they're put to you.
📊 What happens at expiration?
There are two possible outcomes:
1️⃣ If $MRVL stays above $150:
The put expires worthless. You keep the entire $1,150 premium and your $15,000 cash.
That's a 7.7% return on the cash secured for roughly nine weeks.
2️⃣ If $MRVL falls below $150:
You're obligated to buy 100 shares at $150.
But because you collected $11.50 per share upfront, your effective cost basis is just $138.50.
That's about 16% below Marvell's current share price.
⚠️ Why is the premium so high?
Marvell has been volatile following its all-stock deal to acquire Lumentum, first reported on October 29 and announced on November 2.
Options are currently pricing in implied volatility of roughly 71%. Higher implied volatility generally means higher option premiums, but it also reflects greater uncertainty about the stock's potential moves.
⚠️ The risk
Marvell reports earnings on December 1, before this put expires.
A sharp post-earnings selloff could push the stock well below the $138.50 breakeven. At that point, you'd own shares at a market value below your effective purchase price.
The $1,150 premium provides a cushion, not protection against a major decline.
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