Amdocs Ltd (DOX): Sold Naked Puts

I read a bullish article about Amdocs (DOX) a few weeks ago in Barron’s and decided to wait for the chart to point to a better entry point than when the article came out.  DOX fell more than $5.00 from its highs last month.  I put a limit order in yesterday for three September 35 puts (DOXUG) and while DOX traded at 35.81 this morning, down 75 cents for the day, my order hit and I received $227.75 after commissions. 

A few days ago, DOX broke its downward trending line of recent lower highs and then just two days ago used that same line as support for a low.  I think 35 (my strike) is a good line for support, but if I’m wrong, 34 looks even better.  I’ll be sitting on a paper loss if it goes that low, but I think the visit down there will be brief and at expiration I’ll be looking good.  In fact, if DOX goes as low as 34, I’ll likely be thinking of buying some calls to catch the rebound even bigger than my limited profit on my naked puts.

If you want to be really liberal/creative with the DOX chart you can ignore the two lowest points from last week and you’ll see DOX is sitting on the trend line of higher lows that started in January 2007 and touched again in March 2007.  DOX almost got down to that same line again in May before jumping three points to start a new, short-term rally.  The “wishful thinking” line I’m talking about is coming in just above 35 now.

Also interesting (to me) is that just like my HAIN calls in the previous post, my three puts are the only ones to have traded so far today and it’s 11:00 as I write this.  I would have thought more people would have jumped in to cover their positions as DOX dropped nearly 2% on the day.

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