The volatility monster struck last week, but for those of us selling Cash-Secured Puts (CSPs) on Firefly Aerospace Inc. (FLY), the dip was a dividend, not a disaster.
The stock, which has seen heavy selling pressure following a recent failed rocket test and is trading near its 52-week lows (around the $\$25.50$ level), experienced a significant pullback. This increased market fear, which, in the options world, translates directly to higher premiums due to increased implied volatility (IV).
🚀 The $\$26$ Put Premium Payday
While the stock was getting battered, any trader who sold out-of-the-money (OTM) puts—especially the ones around the $\$26$ strike price—likely saw their premium value decay nicely or was able to buy them back for a fraction of the cost.
The Goal: The strategy of selling a CSP is inherently bullish-to-neutral. You're betting the stock won't fall below your strike price before expiration, allowing you to pocket the entire premium.
The Payoff: With FLY bouncing off its recent low, any puts sold with an expiration that passed last week likely expired worthless (if the stock closed above $\$26$), delivering the maximum profit (the premium) straight to your account.
The Backup: Even if the stock dipped temporarily below $\$26$ and bounced back, the time decay (Theta) and the final price action worked in our favor. This trade perfectly illustrates the CSP's appeal: getting paid to express a mild bullish view or setting up an acquisition at a discount.
📈 The Bullish Case for New FLY Acquisitions
Recent news has injected a strong fundamental reason to maintain a long-term bullish outlook on FLY, despite the short-term volatility and execution risks.
The $\$855$ million acquisition of SciTec, a national security tech firm, is a game-changer. It signals a major strategic shift for Firefly, strengthening its position in the highly lucrative Space and Defense sector.
Why This is Bullish:
Revenue Diversification: SciTec's specialty in full-stack software and big data processing for defense moves FLY beyond just being a launch provider. This is critical for stabilizing revenue and reducing reliance on capital-intensive rocket launches.
National Security Focus: Securing a defense contractor enhances Firefly's access to valuable, long-term government contracts, which Wall Street often values highly due to their stability.
Analyst Consensus: The average analyst price target is significantly higher than the current stock price (over $90\%$ upside), suggesting that professionals see a compelling mispricing of the stock's future potential following this strategic pivot.
🧠Ways Forward: Trading & Acquisition Strategy
Given the current depressed price and the major strategic acquisition, here are some actionable ways to approach new FLY acquisitions:
1. Continue Selling Cash-Secured Puts (CSP)
The Play: Use the existing volatility (high IV) to your advantage. Sell OTM puts at a strike price you are comfortable being assigned at.
Recommendation: Look for strikes around $\$24$ to $\$25$ for the next short-term expiration (e.g., 2-4 weeks out). This acts as an iron-clad limit order: you get paid a hefty premium to wait, and if assigned, you own the stock at an even lower price than the recent low.
2. Start a Dollar-Cost Averaging (DCA) Stock Position
The Play: For long-term investors, the current price near the 52-week low presents an excellent entry point to initiate or add to a core position.
Recommendation: Buy a tranche of shares now. Plan out future acquisitions at set intervals or at specific price points (e.g., if the stock retests the $\$25$ low or breaks out above the $\$30$ level). DCA helps smooth out the entry price and capitalizes on the deep discount.
3. The Options Wheel Strategy
The Play: Combine the above two into a complete strategy.
Sell Puts (CSP): Get assigned the shares at your strike (e.g., $\$25$).
Sell Covered Calls (CC): Once assigned, immediately turn around and sell OTM Covered Calls against your new shares (e.g., $\$30$ strike). This generates more income while you wait for the stock to recover to its analyst targets.
The risk is real, as the company is still losing money and execution risk is high, but the potential reward—driven by the recent defense pivot and depressed price—makes it a compelling bullish play. Get paid to wait, or get assigned at a discount!
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