Novavax Inc (NASDAQ:NVAX) fell to the lowest levels since June 2020 yesterday. Shares of the vaccine-maker have been hit hard as the prospects of U.S. approval continue to dim. NVAX stock likely was hit in sympathy with Moderna ( NASDAQ:MRNA). The African Union declined to buy more doses of the Moderna vaccine yesterday, sending MRNA stock down sharply. NVAX stock fell in kind, dropping over 13%.
The real question is whether to jump in now or wait for even lower prices. The recent price action says to still wait for an even cheaper level before pulling the trigger. Selling puts allows you to get paid now for waiting to be a buyer at those lower levels.
The Novavax vaccine never really had a chance to be approved in the U.S. The Food and Drug Administration (FDA)Vaccines Advisory meeting scheduled for today doesn’t even have Novavax on the docket. The future for the Novavax vaccines (Nuvaxovid, and Novavax) lies in Europe, Asia and Australia where it is already approved. India is currently the biggest market where the vaccine is licensed as Covovax.
Bad news is a good news as far as vaccines go. The recent lockdowns in Shanghai, China and uptick in spread of the new Covid-19 variant XE found in the U.K. could lead to an uptick in vaccine adoption across the areas that Novavax has a foothold. That ultimately could provide a floor in NVAX stock.
Implied voaltility (IV) has skyrocketed in NVAX on the latest drubbing. This means option prices are more expensive which is a benefit to a put selling strategy.
For example, selling the NVAX January $50 puts currently would bring in about $12 in option premium. This equates to $1,200 for each put sold. Selling the put positions you to be a buyer of Novavax stock at $38 ($50 strike less $12 received for selling the put). For reference, NVAX stock last traded at $38 near the beginning of the Covid-19 pandemic in May 2020.
Investors looking to buy Novavax stock to their portfolio should wait for a further pullback before considering adding it to the portfolio. Using a put selling strategy is a viable way to take advantage of rich option premiums and get paid for your patience.
On the date of publication, Tim Biggam did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.