WebMD Health Corp. (WBMD) Naked Put Plays
Shares of the provider of health information services to consumers, physicians and healthcare professionals surged 7.45% to an intraday high of $50.77 by 11:50 am ET Friday, trading just $0.42 below the stock's current 52-week high of $51.19.
WebMD reported net income of $0.13 per share for the second quarter this past Tuesday, swinging to profitability from losses experienced in the same quarter last year.
The price of the underlying stock shot up after the firm announced it will pay $50 per share, a 5.8% premium over Wednesday's closing value, to buyback up to 3 million of its shares.
- Bullish options players took advantage of the situation by selling near-term put options
- Traders shed approximately 1,300 puts at the August $50 strike to pocket an average premium of $0.90 per contract
This is a good example how one can utilize good news and momentum to make money but selling naked puts.
Even buying the stock at 50 would still give the trader and opportunity to sell it and make money. There is a $.90 leeway here. Break even point is 49.10. Momentum may carry the trader to higher ground.
Disclosure: Author owns shares of WBMD