Gain Exposure To Blackstone Via A Cash Secured Put

One of the greatest things about the financial markets is being able to invest in companies that are run by people who are experts in their area.

Investors can also access strategies that are not available to individual investors, unless they have multiple millions in net assets.

Blackstone is one of the world’s leading investment firms. They have an array of sophisticated investment professional are are leading experts in the alternative investment space.  That includes areas such as private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds, all on a global basis.

They currently have of $400 billion in assets under management and generate the majority of their income from managing those assets but they also take a cut of the realized profits from the deals they put together.

With global markets continuing to trend higher, owning Blackstone can get you access to real assets, which stand to benefit in such an expansionary environment. Since the financial crisis, the firm’s share price has trended steadily higher, but has seen acceleration as global growth prospects improve.

The firm’s share price bottomed around $23, and trended higher since then. The stock price’s next resistance area looks to be near record highs of $42, representing a nearly 30% increase from current levels. As long as asset markets continue trending higher, expect this asset manager’s share price to follow closely in line.

Blackstone's dividend is also attractive to investors, ranging in a zone around 5-6%, the only downside being that the dividend is not consistent given the variability in the firm's revenue depending on deals that are completed.

Here is a strategy that investors can use to gain exposure to one of the world's foremost asset managers:

Cash Secured Put

A cash secured put is a conservative options strategy that can be used to purchase a stock for lower than the current price.

With Blackstone currently trading at $31.41 traders might be happy to buy the stock for $30.

The June $30 put is trading at $0.93

Instead of waiting for a pullback (which may never come), the trader can sell a cash secured put with a strike price of $30.

If an investor was to sell this put, they would receive $93 in premium income. That’s theirs to keep no matter what happens to the stock over the course of the trade.

However, the investor does have an obligation to buy 100 shares of the stock at $30, even if the stock drops well below that level.

A purchase price of $30 less the $0.93 premium received gives an effective purchase price of $29.07, which is 7.45% below the current price.

If BX stays above $30 and the put expires worthless, the trader makes a 3.20% gain in just over 2 months.

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are ...

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