It sure does cost a lot to live in New York City. My cousin’s daughter lives in Brooklyn, sharing a small apartment with a few friends in their early 20s and fresh out of college. They’re paying a lot to experience the Big Apple.
The Elliman Report from October said the average apartment’s monthly rent for Manhattan, Brooklyn, and Queens was $5,158, 5.2% less than in September. Take the savings and go on a trip to Long Island.
With the student debt today, it’s incredible that anyone under 30 can live in one of these boroughs.
Well, I’m here to help. I’ve got three unusually active options from Friday midday trading that could help pay for some or all of your December rent check.
But be advised, I’m being facetious with my suggestion to use options to pay your rent. Good investors know that the only money to be used for any speculation is the kind you won’t miss if you make a mess of things.
Good luck.
Roku
I see three Roku (ROKU) put options that are unusually active today. All three of them expire in 8 days on Nov. 24. I’ll get to the put to sell for income in a moment. However, let me provide a couple of reasons why I like ROKU stock.
The company reported earnings on Nov. 1. Forget the $350 million operating loss. Investors already know that the video streaming platform continues to scale its advertising business at a loss. However, its adjusted EBITDA margin was negative in the past five quarters until the latest quarter, when it was 4.8%.
I know it's non-GAAP, so it doesn’t count, but on a relative basis, it does matter. The company is progressing toward profitability despite a lower gross margin (40.4%) in Q3 2023.
The second reason I like Roku is that it continues to add eyeballs. It finished Q3 with 75.8 million active accounts, up 2.3 million higher than in the second quarter, with an increase in streaming hours of 1.6 billion. Add those together, and you got ARPU (average revenue per user) of $41.03, its best showing of 2023 despite a very soft ad market.
ROKU stock is up 120% YTD for a reason.
Okay, the Nov. 24 $89 put has a Vol/OI ratio of 4.66. The bid price of $1.74 has an annualized yield of 87% based on a current price of $89.28. If you sell the put, your net price should you have to buy the shares in eight days is $87.54. Momentum suggests you might not have to, collecting $174 for your troubles.
That won’t pay your rent, but if you do this 45 times over the next year, it ought to pay for one or two months’ rent.
Lululemon
The leisure apparel retailer only has one unusually active put option today. It’s the Nov. 24 $400 strike. The volume for this Lululemon (LULU) put is 1,060, 4.11x the open interest. The bid price of $1.10 is an annualized yield of 11.9%. It’s not much relative to the ROKU, but the risk of buying 100 shares for $40,000 is considerably less.
Currently trading around $418.31, it would have to fall 5% over the next eight days to be in a position to have the LULU shares put to you.
That might not seem like a lot, but the trend for LULU shares since March has been up rather than down, gaining 43% since hitting a one-year low of $286.58.
Of the 25 analysts covering LULU, according to Barchart.com data, 21 rate it a Moderate or Strong Buy (4.56 out of 5), with a mean target price of $438.60. The company doesn’t report its Q3 2023 results until December. It’s hard to imagine the shares falling heading into earnings in approximately three weeks. More likely, they will continue to creep up into December.
Worst case scenario: you must buy shares in one of the world’s best apparel companies.
SoFi Technologies
This last one is only some people's cup of tea.
SoFi Technologies (SOFI) gets a lot of press because of all its student loans. However, it slowly is building into a younger person’s Charles Schwab (SCHW). In mid-November, after the digital bank reported blowout earnings, portfolio manager Cathie Wood bought nearly 500,000 shares.
The business model for SoFi is simple: Take the seven million users on its platform, grow that to 14 million over the next few years, and get a healthy portion of those users to sign on and use more than one of its fee-generating products, including loans, mortgages, investing, insurance, credit cards, banking, etc.
Like Roku, it remains a money loser, but that will change as its user base becomes double digits over the next few years.
Three of its unusually active put options today have double-digit Vol/OI ratios. The highest is the Feb. 16/2024 $5 strike. Expiring in 92 days, the $0.29 bid price is an annualized yield of 23.0%.
Right now, it’s trading around $6.72. With a net price of $4.73, should you have to buy the shares, it translates to a 30% decline in its share price over the next three months before you lose money.
I won’t candy-coast this one. It’s the riskiest of the three. As I write this, its shares are down nearly 9% on the day. Although up 21% over the past year, it hasn’t happened without a bunch of volatility. Just ask those people who bought over $11 in late July.
If you’re an aggressive investor, this might be to your liking. If you’re not, you wouldn’t have bothered reading this in the first place.
The choice is yours.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
