Naked Puts on Conn’s (CONN)
Conn’s, Inc. (CONN) is my latest discovery. It’s a rent-to-own regional operator that is still staking out territory, and renting items like mattresses that other competitors avoid. Conn’s has the attention of hedge fund manager David Einhorn on the long side, but it has proven to be volatile enough to provide decent premiums for naked puts.
CONN stock is at $40.93 as I write. Normally I might just sell one month out, but in this case, the Sep 40 Puts are selling for $3.10. That’s a fantastic 7.6% premium for a seven-and-a-half-week holding period, or a 53% annualized return. You even get a 93-cent cushion.
I’d be happy to scoop CONN stock up at an effective price of $36.47, considering fair value is well over $50, if not higher.