By the time my commentary is published Friday morning, we will have the latest economic data, including the University of Michigan’s Consumer Confidence Index for December and the Core PCE Price Index for September.
Economists aren’t anticipating any significant changes, which is a bit of a mixed bag for investors. Sure, a slight uptick in consumer sentiment is good news, but inflation still looms large, even though tariffs seem less troublesome than originally thought.
Investors are likely eyeing the potential for a rate cut next week, with over an 80% chance that the Federal Reserve will reduce interest rates on December 10th. This bodes well for stock markets. We’ll soon find out.
Yesterday saw about 1,341 calls and puts exhibiting unusual activity in options trading, notably those with a days-to-expiration (DTE) of a week or more.
With stock prices hanging around relatively high levels—like the Shiller PER ratio exceeding 40, its highest since 1999—I’m focusing on potential cash-backed puts that could yield a profit while allowing for a favorable entry point into quality stocks for the long haul.
Here are three interesting picks from yesterday’s surge in put options activity.
Hope you have a wonderful weekend!
Netflix (NFLX)
Before diving into Netflix (NFLX), I’ve been writing about options for almost four years, and I find it intriguing how some options keep popping up on the daily list. It’s a curious phenomenon, really.
Barchart’s Unusual Options Activity page showed there were 11 put options for Netflix with strike prices between $218 and $70. All these had a volume-to-open interest (Vol/OI) ratio of 1.45 or more.
One notable option is an $88 put expiring on January 2, 2026, which has a Vol/OI ratio of 4.01.
Since this relates to a cash-backed put, it’s currently 14.75% out of the money (OTM), yielding an annualized return of 4.9% on a $34 premium. The probability that Netflix will trade above the break-even price of $87.66 sits at a robust 92.24%.
While an annualized return like this may not deliver fortunes, there’s a slight chance to purchase 100 shares of NFLX for $87.66 in just 29 days, which presents a more attractive entry point. This aligns well with a strategy known as the “wheel,” involving selling cash-backed puts until you secure the stock and subsequently making covered calls on it.
However, I noticed another Netflix put option at an $84 strike price, expiring on the same date. This put had an impressive volume/OI ratio of 26.37, nearly seven times that of the $88 strike.
The annualized return for this option is lower, but the probability of profit is even greater. Still, being closer to 20% OTM is more appealing when selling cash-backed puts. The stock hasn’t hit its break-even point of $83.87 since early January.
Netflix is a solid business, no doubt. Acquiring Warner Bros. Discovery for $72 billion in cash and stock may stir some short-term turbulence. But in the long run, it’s likely to remain a valuable stock to own, whether or not the government approves the merger.
Utilizing an $84 put could be a smart approach to potentially buy in at a lower price, coupled with a bit of income.
ON Semiconductor (ON)
I’m not usually inclined to write about semiconductor or many tech companies, but ON Semiconductor (ON) recently caught my interest with a $49 put for January 2, 2026, showing a Vol/OI ratio of 8.89.
To be honest, both this put and the earlier Netflix put saw limited trading. The highest Vol/OI ratio yesterday belonged to Hertz (HTZ) with a $9 put for January 16, 2026, trading at 165.13 and moving 103,536 contracts.
The $49 strike for ON is 10.57% OTM, with a break-even point at $48.30, which translates to an 18.2% annualized return on a $70 premium. This is quite appealing for anyone looking to generate income while positioning for a long-term investment in ON.
ON faces competition from big names like Texas Instruments (TXN) and Analog Devices (ADI). While ON’s stock has appreciated 86% in the last five years—still trailing ADI by about 10 percentage points—it far outpaces TXN, which saw a mere 9.4% increase during the same period.
Wall Street analysts aren’t particularly bullish on ON, with only 14 out of 33 giving it a buy rating, resulting in a modest 12-month price target of $58.78—just 6% over the current share price.
Interestingly, less than 30 months ago, ON was trading around $120. Now, it’s less than half that value.
That context helps explain the $6 billion share buyback plan announced on Nov. 18 for the next three years. Previously, the company aimed for $2.1 billion out of its $3 billion buyback authorization but spent almost all of its $933.2 million free cash flow on buybacks in the first nine months of 2025.
If you’re a contrarian at heart, ON might be worth a deeper look.
Tesla (TSLA)
I used to be quite optimistic about Tesla (TSLA). However, since Elon Musk got caught up in various distractions, my enthusiasm has dimmed. His potential multi-trillion dollar salary package doesn’t help either. Even without the zero, it seems excessive.
Nonetheless, investors are still paying close attention to Musk’s every move, hoping for the next groundbreaking product to lift Tesla’s sales. Recently, the company’s declining EV revenues in both China and Europe have been a topic of discussion. Interestingly, Tesla’s stock price has seen a 59% rise over the past six months, indicating a potential long-term rally.
Barchart contributor Aditya Raghunath recently highlighted the potential of the Optimus humanoid robot, with Ark Invest’s Cathie Wood suggesting it could represent one of the most significant opportunities in artificial intelligence.
It’s hard to overlook Tesla’s stock with such potential extending beyond EVs.
In terms of unusual options activity, a February 20, 2026, $315 put caught my attention. It’s deeply OTM (30.7%), as Tesla last traded around $315 in August.
While the volume on this $315 put is low, yielding a 5.9% annualized return, it could serve as an attractive income avenue for those patient enough to wait for a better entry point into TSLA.
Typically, we avoid recommending options with a DTE longer than 60 days, but the volatility of Tesla’s stock means that there remains a chance the $315 strike could be hit in 77 days. However, the forecast for the stock trading below its break-even point of $311.10 is only 8.04%.
Also, as the DTE shortens, so does the potential annualized return. Currently, the bid price for the $315 put is $1.45, implying an annualized return of 4.0%.
Ultimately, the intention behind selling these cash-backed puts isn’t just to generate income but to secure a better entry point for Tesla stock. A DTE of 49 days lessens the likelihood the stock will be assigned.
