text: Investors eyeing a purchase of Madrigal Pharmaceuticals Inc (Symbol: MDGL) shares, but tentative about paying the going market price of $97.30/share, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the April 2020 put at the $70 strike, which has a bid at the time of this writing of $6.60. Collecting that bid as the premium represents a 9.4% return against the $70 commitment, or a 16.6% annualized rate of return (at Stock Options Channel we call this the YieldBoost).
  Selling a put does not give an investor access to MDGL Madrigal Pharmaceuticals Inc sees its shares decline 27.6% and the contract is exercised (resulting in a cost basis of $63.40 per share before broker commissions, subtracting the $6.60 from $70), the only upside to the put seller is from collecting that premium for the 16.6% annualized rate of return.
  Below is a chart showing the trailing twelve month trading history for Madrigal Pharmaceuticals Inc, and highlighting in green where the $70 strike is located relative to that history:
  The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the April 2020 put at the $70 strike for the 16.6% annualized rate of return represents good reward for the risks. We calculate the trailing twelve month volatility for Madrigal Pharmaceuticals Inc (considering the last 250 trading day closing values as well as today's price of $97.30) to be 64%. For other put options contract ideas at the various different available expirations, visit the MDGL Stock Options page of StockOptionsChannel.com.
  In mid-afternoon trading on Monday, the put volume among S&P 500 components was 1.13M contracts, with call volume at 1.13M, S&P 500 »
  The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.