Summary of Investment Strategy for SAP SE

Author: Koen Hoorelbeke, Investment and Options Strategist

Date: June 27, 2025

Overview

The article discusses a strategic approach to investing in SAP SE shares through the use of options, specifically focusing on selling put options. This method allows investors to potentially earn income while defining their entry point for purchasing shares at a lower price.

Current Market Context

SAP SE's stock has shown strong performance, reaching record highs above EUR 275 in May 2025, but has recently pulled back to around EUR 255. With an earnings report scheduled for July 22, 2025, the article suggests that option premiums are likely to rise due to increased volatility, making it an opportune time for this investment strategy.

Understanding Options

Options are contracts that provide the right, but not the obligation, to buy or sell a stock at a predetermined price before a specified date. The article focuses on:

• Call Options: Right to buy shares.
• Put Options: Right to sell shares.

In this strategy, investors sell a put option, agreeing to buy SAP shares at a specified price (e.g., EUR 250) if the buyer exercises their right. In return, the seller receives a premium upfront.

Example Trade

The article provides a hypothetical trade example:

• Product: SAP Mini (10) put
• Strike Price: EUR 250
• Expiry: July 18, 2025
• Premium: EUR 3.76 per share
• Total Income: EUR 37.60 (10 shares × EUR 3.76)
• Cash to Set Aside: EUR 2,500
• Breakeven Level: EUR 246.24
• Estimated Yield: 1.5% over 24 days if the option expires without assignment.

Benefits of Mini Options

Mini options cover 10 shares per contract, significantly lowering the capital required for individual investors. This makes the strategy more accessible, as it requires only EUR 2,500 instead of EUR 25,000.

Potential Outcomes at Expiry

At expiry, the outcomes depend on SAP's share price:

• If above EUR 250: The option expires unused, and the investor keeps the premium.
• If near EUR 246: The option is exercised, and the investor buys shares at an effective price of EUR 246.24.
• If below EUR 246: Shares are assigned, and the investor holds shares with potential unrealized losses.

Risks and Considerations

Investors should be aware of the risks involved:

• Assignment occurs only at expiry, and if the stock price falls below the strike price, the investor may be required to buy shares.
• Further declines in share price can lead to unrealized losses.
• Upcoming earnings reports can add volatility to the stock price.

Conclusion

This strategy allows investors to earn income while potentially acquiring shares at a lower price. However, it requires careful consideration of risks and individual financial circumstances.

Key Terms Explained

• Option: A contract giving the right to buy or sell a stock at a set price.
• Put Option: Gives the right to sell shares.
• Premium: Payment received when selling an option.
• Assignment: When the buyer of the option exercises it at expiry.
• Strike Price: The price at which shares may be bought if assigned.
• Mini Option: Covers 10 shares instead of 100.