Sold Allstate (ALL) Naked Puts
I haven’t paid attention to Allstate (NYSE: ALL) much until this week when I read a bullish article in Barron’s June 8th edition and then on Motley Fool after that. I started the week with a limit order for a put spread (25 and 22.50) that didn’t hit. I forgot about it until this morning and returned with a straight naked put order for the June 24 strike.
While ALL was trading at $24.72 my order hit and I sold four July 24 naked puts (ALLSX) for $1.05 each and received $406.99 after commissions. I think around $24.00 could be a good floor for ALL if the current price range doesn’t hold. If I buy it at $24.00, my cost will be around $23.00 per share and I’ll probably consider holding and aiming for a higher covered call strike or playing it safer and aiming for a $22.50 strike.
Of course I consulted the ALL chart before I made my trade, but I also checked the fundamentals. ALL has a 3.2% dividend yield (payable before my put options expire). ALL’s forward P/E ratio is 5.87. That puts it on the lower half of its historical trailing P/E range. If they can hit their estimates, ALL should have fairly little downside risk and a decent amount of upside risk. All I need it to do is stay flat or not dip much and I’ll leave with a full profit.
For the rest of my portfolio, MON and SLB are trading above my naked call strikes, but are down for today. I’m watching them closely and doing my best not to panic before they ease back up some more. SLB is the scariest as it rocketed more than $4.00 yesterday before coming back down to reality some. Only one more week to go before June options expiration, but a lot can happen before then. Any new options I sell will likely be for July expiration, starting with ALL today.
Comment by Ronan
Hi,
Yeah, ALL is a company that I’ve been selling naked puts on for the past couple of months. The latest are June 22 Puts for which I took in $109 each. Obviously, I expect them to close out of the money. I bought back my NDAQ 17.50 Puts last week which will turn out to be a mistake – but there’s no harm in locking in a profit. I’ve had a look at the July Puts but the premiums are just a little lower than I’d like so I’m waiting to see if the stock price pulls back a bit.
Two other companies I’m keeping a close eye on are AEM (if this pulls back close to the $50 mark, I’ll probably sell some July 45 Naked Puts) and TSM (I’m very close to ‘pulling the trigger’ and selling some July 10 Naked Puts at $0.80)
I previously held some AEM shares and sold at $54 to buy some ISRG (this turned out to be a good move because I’m up almost 80%). I’d now like to add some exposure to gold to my portfolio and would do so if AEM pulls back enough to give me a couple of dollars premium for the July 45 Puts.
Comment by Alex Fotopoulos
Thanks for sharing Ronan – I just checked AEM – It’s getting close to its 50 day sma, that could be a new good entry point too. TSM just broke through its 50 day so I’m waiting to see what happens now, although the $10 support line broke, it closed above it. That’s good. I haven’t followed ISRG in the past. That’s an interesting chart I’ll have to start watching now.
Anyone else who wants to share some recent trades or stock picks, please do.