Palomar Medical Technologies (NASDAQ:PMTI) is a researcher and developer of light-based systems for hair removal and other cosmetic procedures. The firm researches, develops, manufactures, markets, sells and services light-based products used to perform procedures addressing medical and cosmetic concerns. The company also offers a wide range of products based on its technologies that include hair removal; non-invasive treatment of facial and leg veins and other benign vascular lesions, such as rosacea, spider veins, port wine stains and hemangiomas; removal of benign pigmented lesions, such as age and sun spots; tattoo removal; acne treatment; pseudofolliculitis barbae (PFB), and other skin treatments.
Palomar has been one of our favorite "premium-selling" issues for the past few months and considering the robust option prices in the stock, along with its gradually increasing share value, the trend seems likely to continue. Our analysis of PMTI suggests a pull-back/consolidation is forthcoming in the near-term, which should allow traders to achieve a slightly higher credit for the sold puts, thus lowering the overall cost basis in the issue. Despite the lack of interest in the APR-22.50 (put) option series, we will target $0.45 to $0.50 initially to improve the potential profit in this conservative position.
Sell Put APR 22.50 HKQ-PX
Current Bid = $0.40 Open Interest = 0
Potential Profit (5 contracts) = $200
Initial Margin (5 contracts) = $3,050
Return on Investment (max) = 4.4%
Cost Basis in Stock = $22.10
Days to Expiration = 45