Investors may be bearish on SoFi Technologies (SOFI), given today's unusual put options volume. Or are they? The puts are deeply "in-the-money" and expire in over 2.3 years. The put sellers get to buy at a deep discount.
SOFI is down today at $16.07 in midday trading on Monday, Sept. 28, well off its recent peak of $19.18 on August 27. It's been on a downtrend since then, as the chart below from Barchart shows.
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SOFI stock - last 3 months - Barchart - Sept. 28 This chart also shows that SOFI bottomed out on July 29 at $15.25. That was right before its July 29 Q2 results release at the close of business that day.
Maybe this is a pattern where investors push SOFI down right before its earnings release, with the next one due out in less than a month (Oct. 26).
It could also explain the heavy volume in today's put options expiring in over 2 years and 3+ months.
Unusual Put Options Volume Today
This can be seen in Barchart's Unusual Stock Options Activity Report today. It shows that 1,000 put contracts have traded at the $20.00 strike price, expiring on Jan. 19, 2029.
SOFI puts expiring Jan. 19, 2029 - Barchart Unusual Stock Options Activity Report - Sept. 28, 2026 That volume is almost 3 times the prior outstanding volume, and the put premium paid was $6.70. Since SOFI stock is at $16.07, the strike price is $3.93 above the market price, so it's “in the money” (ITM). Why are buyers and sellers willing to do this?
Buyers. Buyers of these puts are willing to overpay (i.e., $6.70-$3.93, or $2.77 in extrinsic value). They expect to see SOFI drop over 17.2% to at least $13.30 (i.e., $20-$6.70) in 844 days, or 2 years and almost 4 months.
They must be very bearish. They see SOFI as overvalued, and they are willing to pay up for a huge decline.
Sellers. On the other hand, sellers of these puts collect that income immediately. They are already obligated to buy shares at $20.00. But, their net buy-in price is just $13.30, so that is a 17.2% discount.
They are essentially bullish on SOFI. The sellers have to post $2000 for every contract they sold to the buyers. So, their income amounts to a yield of 33.5% ($6.70/$20.00) over 2.3 years. That works out to an annualized rate of over 14.5%. And they can reinvest the income already received.
In effect, they are betting that SOFI won't drop below $13.30 as Jan. 19, 2029, approaches. But even if SOFI stays flat or drops lower, the extrinsic value may dissipate, and the premium may still fall, giving them a profit.
Is SOFI Stock Overvalued?
Sofi Technologies makes net income from lending and fees, and its net income has been growing. Analysts expect 2026 earnings per share (EPS) to hit 59 cents and 82 cents next year.
That puts SOFI stock on a forward price/earnings (P/E) ratio of 27.2x and 19.6x, respectively. That's about equal to its 27.4x 5-year historical average, according to Morningstar.
Moreover, analysts have higher price targets, with an average price target (PT) of $20.35 per share from 25 analysts in Yahoo! Finance's survey. Barchart's mean PT is $20.33.
So, there could be over 26% upside in SOFI stock, although it's not clear when that would happen.
Expected Returns for Short-Put Investors
The bottom line here is that the short-put investors have good potential upside. Even if their accounts are assigned to buy in at $20.00, the expected return (ER) is over 52%;
$20.34 PT / $13.30 net buy-in -1 = 52.9%
Let's say there is a 2/3rds chance that occurs. Conversely, there might be a ⅓ chance that the investor would have a potential 25% loss if, say, SOFI dropped to $10.00. So, the next ER is:
(0.6667 x .529) + (0.3333 x -0.25) = 0.353 - 0.083 = 0.27, i.e., a +27% expected return
Moreover, the short-sellers of these puts get to invest the $6.70 in income, which improves the ER.
And don't forget, the worst that happens here is these short-put investors end up owning SOFI shares. They can then do covered calls and wait for SOFI stock to appreciate.
The bottom line is that this unusual volume in SOFI in-the-money puts is an attractive play for short-sellers.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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