Lam Research Put Options Short Play - Make A 6% Yield Over 2 Months

Lam Research Inc. (LRCX) stock has been on a tear, but that has also raised LTCX put option premiums. An investor can short an out-of-the-money put (17% lower strike price) for a 6% yield over 2 months.

LRCX rose over 5.2% on Monday, June 22, closing at $409.54. Moreover, in the last two weeks, since June 5, the stock is up 35% from a recent trough of $303.28.

LRCX stock - last 3 months - Barchart - June 21, 2026

I discussed Lam Research's underlying value in a June 16 Barchart article, “Unusual Put Options Activity in Lam Research Stock Highlights Its Value.”

I showed that LRCX could be worth at least $478 per share, based on its strong free cash flow (FCF). That is still 16.7% higher, even after Monday's rise.

This was based on FY 27 revenue estimates (for the year ending June 30, 2027) of $30.54 billion, a 25% FCF margin, and a FCF yield of almost 1.3% (1.288%). Here is how that works:

  $30.54b x 0.25 = $7.635 billion FCF

  $7.635b / 0.01288 = $591.9 billion fair market value (FMV)

Since then, analysts have raised their revenue forecast to $30.6 billion, so the new FMV result will be slightly higher:

  $30.6 x 0.25 = $7.65 billion FCF

  $7.65b / 0.01288 = $593.94 billion FMV

Price Targets for LRCX Stock

That is +16.0% higher than its present $512.16 billion market cap, as of June 21. In other words, LRCX's price target (PT) is 16% higher:

  $409.54 price on June 21 x 1.16 = $475.07 per share

The bottom line is that LRCX stock could still move higher. Moreover, if the market decides to raise the valuation metric to say 1.25%, the FMV would be $100 billion from its existing $512b market value:

  $7.65b / 0.0125 = $612 billion

That $100 increase represents a 19.53% potential upside in LRCX stock to almost $490 per share:

  $409.54 price x 1.1953 = $489.52 price target (PT)

Other analysts are playing catch-up, although they are raising their PTs. For example, Yahoo! Finance says the average of 35 analysts is $335.74. That's up from $323.38 a week ago, as seen in my June 16 Barchart article. Similarly, Barchart's PT is now $336.63, up from $325.60. I suspect Wall Street analysts will keep playing catch-up, as LRCX rises.

However, there is no guarantee this will occur. One way to play LRCX is to sell short deep out-of-the-money (OTM) puts, given their high premiums.

Shorting LRCX Puts at Deep Out-of-the-Money (OTM) Strike Prices

As I discussed in my last article, the Aug. 21 expiry shows that much lower put option premiums are very high. For example, the $340.00 put option strike price, which is almost 17% below today's price, still has a high midpoint premium of $20.85 per contract.

LRCX puts expiring Aug. 21 (60 days to expiry) - Barchart - As of June 21, 2026

That means an investor who sells short this put contract earns an immediate yield of 6.13% for the next 60 days:

  $20.85 / $340.00

Here is how that works. The investor first posts $34,000 in cash or buying power with a brokerage firm. Then, the investor can enter an order to “Sell to Open” 1 put at the $340.00 strike price expiring Aug. 21.

This means that enough collateral has been posted to buy 100 shares at $340.00, should LRCX drop 17% to $340.00 anytime in the next 60 days to Aug. 21.

Then, the account will immediately receive $2,085 in cash. As a result, the net breakeven point, even if LRCX drops to $340.00 (i.e., down 17%), is:

  $34,000 - $2,085 = $31,915, i.e., $319.15 per share

That would be 22% below today's price. There is very little chance that it will happen. For one, the delta ratio is -0.2272, implying less than a 23% probability that LRCX will drop to $340.00 by Aug. 21.

Moreover, if an investor can repeat this trade for the next 3 months, the expected return is over 18%:

  6.13% short-put yield x 3 = 18.39%.

That is nearly equal to the 16% expected return from my $475 price target above. It's also almost equal to the 19.53% higher PT of $489.52.

So, you can see this as an attractive alternative play for value investors in LRCX stock.