Allegheny Technologies Inc (ATI) Naked Puts
I wrote about ATI a couple of times last week and basically lucked out with Friday’s closing price finishing 4 cents in my favor OTM. Yesterday ATI dropped back below my previous strike of 110 and today it has bounced around even and slightly down. I still like ATI’s fundamentals and I’m still trying to make my mind up on the chart, but have seen a potential area of support right around where it is now.
Schaeffersresearch.com rates ATI 6.5 out of 10 today and Jim Cramer (at least last week) still likes ATI and other steel companies. Since I’m not overconfident in where this entire market will be in two months, I decided to sell a put out-of-the-money. While ATI was trading at 108.81, my limit for one August 105 put (ATITA) hit and I received $439.25 after commissions. This gives me downside protection to around 100.80 after potential assignment commissions. With ATI’s recent April intraday high of 119.70, the 100 range feels like it could be a somewhat safe break even point. With such high premiums on ATI I think I’ll be able to stay to the profit side, even in a deeper pull back.
In my IRA I had an Adobe (ADBE) June 42.50 covered call get assigned only to see ADBE drop below 42.50 today. I was planning to jump right back in, but I’m now questioning that move. ADBE has broken through a long-term trend line this week and I think it’ll be wise to sit back and wait for a better entry point. While the downside is probably fairly limited, I would rather wait on this one until I see a clearer picture. That waiting period could be as short as later this afternoon or tomorrow. I’ll see if I can find something better in the meantime.
Lastly and least importantly, MRO split 2 for 1. So, now I have two 62.50 puts instead of one 125 put.
Technorati Tags: naked puts, investing, stocks, options, covered calls, options strategies, trade, ATI, ADBE
Comment by vikasb
Hi there, I came across your blog recently and I must say that I am pretty impressed with your strategy to sell OTM naked puts.
Have you ever considered selling OTM Put Spreads (instead of naked puts). Yes I understand that this will reduce the amount of premium you receive but it will provide you a level of protection (due to the long put) in case the stock drops significantly.
By the way, I sold some naked puts (ATI July 100 @ 0.9) this afternoon.
Cheers
Vikas
Comment by The Trader
Vikas,
Cool on your ATI put sale. I think you are pretty safe at that strike. I’d love to hear about more of your trades here as I’m sure the other readers would. The more we share, the more we can each make…
I’ve considered spreads, but I never can make myself pull the trigger. I only sell naked calls on stocks I think are going up (or at least staying flat). That means I’d only be second guessing myself and likely making less money, especially in a bull market. Look at my previous month. All puts finished OTM. Selling an OTM put spread would have meant less for me. Now, that said, I might change my mind once the market turns in the other direction. I’ve also sold naked calls on postions that sink below my put’s strike. That’s just more income though with more risk.