Here’s How to Extract 61% Yield Off Blink Charging (BLNK) Put Options

Penny stocks can be a funny investment vehicle. They can also be wildly lucrative, as electric-vehicle infrastructure specialist Blink Charging (BLNK) recently demonstrated. Last Friday, BLNK stock popped over 10% on what appeared to be little corporate-specific news. Instead, it seemed as if market participants began fully digesting an earlier positive announcement.

Late last month, Blink’s leadership team revealed that it surpassed the milestone of 100,000 chargers sold, deployed or contracted globally. “We’re proud to reach this significant accomplishment through dedicated pursuit of our mission to advance the energy transition through Blink’s innovative charging solutions,” said Brendan Jones, Blink’s President and CEO.

“By prioritizing, listening to, and understanding our customers’ needs and expectations, we have learned to strategically tailor charger placement and installation, so that the right charger is in the right place at the right time for every EV driver,” Jones added. Still, BLNK stock has a long road ahead to credibility.

In August, Barchart content partner The Motley Fool stated that Blink was in trouble due to its money-losing venture. It’s difficult to not see the issue. To be sure, Blink has done a great job of boosting revenue last year. Unfortunately, net losses continue to pile up, adding to concerns for BLNK stock.

Not helping matters is that EV sales have noticeably slowed down. Nevertheless, this headwind could be temporary, as experts are projecting significant growth over the next few years. Of course, it’s impossible to know for how long investors at large will be patient with BLNK stock. But it would be incorrect to state that Blink has zero chance of success and that opens the door to an interesting opportunity.

Unusual Options Activity Shines the Spotlight on BLNK Stock

On Friday, BLNK stock ranked among the top securities featuring unusually elevated options activity. This screener can be helpful in potentially identifying ideas that the smart money may be focused on. With Blink, the broader tailwind of a better-than-expected jobs report may have contributed to the positive sentiment.

Whatever the main catalyst, total options volume for BLNK stock reached 28,805 contracts versus an open interest reading of 124,546 contracts. Friday’s volume represented a 581.61% surge over the trailing one-month average metric. Further, call volume landed at 25,492 contracts, easily outpacing put volume of only 3,313.

With the put/call ratio set at a lowly 0.13, this has positive overtones. After all, call options afford holders the right (but not the obligation) to buy the underlying security at the listed strike price. A closer inspection of options flow data — which filters exclusively for big block transactions likely placed by professional or institutional investors — reveals that net trade sentiment reached $27,300, favoring the bulls.

Premiums for options associated with bullish sentiment reached in total $82,700, whereas premiums for bearish derivatives sat at $-55,400. Among the optimistic trades, the overwhelmingly majority represented bought call options, with a sprinkling of sold puts.

On average, Blink’s options chain shows implied volatility (IV) reaching 100.91%, conspicuously above historical volatility (HV) of 71.97%. Stated differently, the market’s anticipation of movement for BLNK stock is much higher than normal. Therefore, all other things being equal, it’s not particularly advantageous to buy options due to their high premiums.

However, selling options could be enticing, again because of the hot premiums. If you’re willing to take the risk, a bull put spread could be an attractive idea.

Extracting Huge Yield Quickly from Blink Charging

Falling under the category of vertical options strategies, a bull put spread is a multi-leg transaction involving two legs: selling a put option to generate income and then buying a put at a lower strike (of the same expiration date) to cap off the risk of assignment.

For those willing to white-knuckle it to mid-November, the following idea could be intriguing:

• Expiration date: Nov. 15, 2024
• Sell the $2 put at a bid of 28 cents per contract.
• Buy the $1.50 put at an ask of 9 cents.
• The resulting net income received of 19 cents per contract is the most we can receive from this trade.
• The maximum loss comes out to 31 cents.
• Notably, the risk-reward ratio is 1.63 to 1, translating to a yield of 61.29%.
• Breakeven lands at $1.81.

So long as BLNK stock stays above $1.81, the above trade will generate at least some profit. And if shares stay at or above the high strike price of $2, the put seller (writer) will be able to take home the entire reward of 19 cents per contract (or $19).

To be sure, this is a high-risk wager. At a closing price of $1.96 on Friday, there’s only a 7.65% gap to the breakeven price. Because BLNK’s 60-month beta stands at 2.66, such a gap can be melted down in no time. You must believe in the bullish thesis.

At the same time, the risk-reward profile is known up front. Again, the most you can lose is 31 cents and the most you can gain is 19 cents. In many cases, that’s a lot better than rolling the dice directly on a penny stock, not knowing what might happen.

On the date of publication, Josh Enomoto 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.