CISCO (CSCO) Ahead of Earnings
I own 100 shares of Cisco (CSCO) in my IRA that I bought to help remind me to keep an eye on it. I planned to buy more if it came down some and maybe even if it went up. Yesterday I noticed CSCO’s chart was hitting its trend line of higher lows and at the same time was near a mid-June high that also acted as support four times in July. I started to buy more in my IRA, but have my money tied up in other stocks and while considering if I should sell other positions to get in deeper in CSCO I realized earnings are being announced Tuesday and I should be more careful the way things have been going these days. I have a little exposure, but didn’t want to risk too much more.
With option premiums generally higher before earnings and the overall higher volatility in the market right now I decided to go with my old faithful, naked puts. I sold two September 27.50 puts (CCQUE) while CSCO was trading at 28.97 and received $287.00 after commissions. Even if CSCO misses earnings, I believe support should hold above 27.50. If they beat earnings I get my small “win” on the options and have the 100 shares in my IRA that can reap the bigger rewards.
On a fundamental note, CSCO is trading to the lower side of its p/e ratio range from the past five years. That gives a slight cushion should things not go my way and can be a catapult if CSCO beats earnings.
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Comment by Kadena
CSCO up 1.60 to start Wed. I got to learn how to do naked put selling. Do you ever reveal your broker of choice to accomplish naked put selling? I currently have accounts with E*Trade and TOS (thinkorswim).
Another point, feel free to use me as an example of getting whipsawed when watching stock/option prices. I sold yesterday in early downturn, and everything recovered later and is higher today. I have taken significant balance hits the last 2 months, but am finally ready to start fresh where I am and move on. Always be careful. I feel like I am much better at “wanting” to make money, thank “executing”, but you always get to go again. Well, it’s a bit tough with my schedule over here, and needing to sleep during market hours. I should find my way soon with a better system. This Bull run is incredible. DOW 20,000 anyone?
Comment by The Trader
Yep, I’m with Ameritrade. Interactive Brokers is supposed to be good. I used them briefly, but a lot of the “bells and whistles” were blocked at my office so I switched. Their prices are much cheaper.
When thinking of naked puts, think of how you trade covered calls. The risk/reward is the same, but without putting money down. That’s how I keep the $25,000 I put in a money market I wrote about a few weeks ago. I just got my first $39 dividend deposit from it. Not much, but was money I was missing out on before.