Cash-secured puts are a good approach for investors looking to build a position in XPEL (XPEL) or earn high-yield income on a stock they don’t mind holding at a discount. For example, you can sell XPEL Inc.’s May 42.5 cash-backed put for $1.90 per contract. If XPEL remains above $42.50, it will remain at a premium of 4.4% above the strike price for approximately four weeks. In the worst case scenario, if the stock falls below the $42.50 strike price by the May expiration, you would buy the stock at an effective price of $40.60 (the strike price less the premium collected by selling the put), or a 12% discount to the current stock price. A return of 4.4% in about 4 weeks translates into an annualized return of over 50%. If you’re interested, read on. XPEL Inc., based in San Antonio, Texas, is a leading provider of protective films and coatings, including automotive paint protection films (PPF), surface protection films, automotive and architectural window films, and ceramic coatings. XPEL operates on an “asset-light” model focused on brand equity, proprietary Design Access Program software, and an extensive global distribution network. XPEL is more than just a niche auto accessory for luxury and enthusiast car owners, and PPF installation rates remain low compared to the total addressable market. The company has expanded into architectural window films, marine protection, and ceramic coatings for aircraft to reduce sensitivity to automotive cycles. With a high return on invested capital, projected earnings growth of 10.5-12% over the next two years, and adjusted EPS growth of over 20% annually through FY2027, the valuation is very reasonable at approximately 21.8x estimated FY2026 EPS of 2.12. XPEL’s critics point to the cyclical nature of the auto industry. If new car sales, especially luxury cars, continue to be sluggish, demand for PPF may decline. Competition also comes from protective equipment installed by original equipment manufacturers and from large chemical conglomerates such as 3M, which are more aggressively competing on price. Please also note that inventory receipts/destocking at the dealer level may result in “volatile” quarterly earnings and short-term price fluctuations in some cases. I look forward to the company leveraging its DAP software to maintain installer loyalty and continue to expand its international footprint, especially in Europe and emerging markets. In this scenario, stock prices are likely to remain flat to slightly up while continuing to grow in the low-to-mid teens. By selling volatility, we capture value even if the stock price remains within a certain range. There is one important point. XPEL is a relatively small company. With a valuation of approximately $1.25 billion and just over 1,300 employees, it is actually a small-cap company. As a result, option trading volumes are relatively low. When an option’s trading volume is low, the spread between bid and ask prices can and often does widen. Therefore, it is important to be patient, identify a fair mid-market price to execute your trades, and use limit orders. If the stock price falls in the next 30 days, be prepared to be assigned a put and buy the stock at a discount. For those wondering how I established $1.90 as a fair price to sell a put with the stock trading at approximately $46.20, I did so by first looking at the realized and implied volatility of the stock. The trailing 30-day realized volatility is approximately 45% and the one-month implied volatility is approximately 65%. This equates to a “fair” or “theoretical” value of approximately $1.94 as of this writing. As it happens, some contracts were still trading at $1.90 today, even though the market for those options was between $1.40 and $3.20. Another way to gain similar exposure is through a “buy write.” In other words, you buy 100 shares of stock and sell an appreciation call on the stock to generate a little extra premium. Again, a little patience is required. For example, you can place a limit order until canceled to buy a stock and sell the May $50 strike call for, say, $1.85. Use a mid-price limit order and wait for execution. It is better to wait for a good price and not execute than to rush into a trade at a bad price. Disclosure: None. All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, its parent or affiliates, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. 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