NVO Put and Call Options in the 1/11/26 update

[Harn]

Hi Sol and investors,

I'm confused by the put option on NVO in today's update: sell NVO puts at a strike price of $60 when NVO trades in the 48 to 50 range.

Would this not result in an immediate purchase of NVO at $60, a higher price than NVO is trading at? Is this a typo or is this really a strategy that I don't understand?


Thanks!

- Harn

[SOL]

Generally speaking, long-dated puts are not assigned immediately. If assignment does happen, the effective cost becomes 60, minus what remains after purchasing the call, so you end up with leveraged upside exposure while paying only slightly more for the stock. So far, Only about one-third of the capital is deployed, leaving the rest available to add shares later at lower levels if the opportunity shows up.

For those who prefer simplicity, the same idea is also presented as a straight equity position in the B&B portfolio.

[Harn]

Thanks, I think I get it now.

[SOL]

I probably should have explained this more clearly, especially for those new to options and puts.

In practice, most people who buy puts have no intention of exercising them. They trade the option itself, particularly when there is time left on the contract. It is often the fastest way to express a bearish view or trade volatility. Exercise usually happens close to expiration and typically only when the option is deep in the money. Time premium matters. The more time left, the lower the chance of exercise.

That said, assignment can happen. If you sell a put and the holder exercises, the shares are put into your account, and you are obligated to buy them.

If you collect, for example, $7 in premium and assignment occurs, your effective cost becomes the strike price minus that premium. In many cases, this means you end up owning the stock cheaper than if you had placed a simple limit order. You might have wanted it at 55, but through the put you get it at 52.

At that point, you own the shares. If you used part of the premium to buy a call, you now have stock exposure plus additional upside funded by the premium you collected. It is not magic, and it is not risk-free, but when used correctly, it can be a more efficient way to enter a position than a straight limit order.

The key rule is simple: only use this on stocks you actually want to own. If you try to speculate with this approach, it is, for lack of a better phrase, an early grave.