Qualcomm, Inc (QCOM) is one of those stocks I always follow, some months closer than others. They’ve been bogged down for years in legal struggles over patents making their stock’s price not reflect their true value. That’s the true value if the patent issues work in their favor which likely will not be resolved any time soon.
I put an order in late yesterday to sell some naked puts and reduced my limit order’s price this morning pre-market. A few minutes after the market opened QCOM dipped and on the way down, while QCOM was trading at 42.09, my order hit and I sold two QCOM May 40 naked puts (AAOQH) and I received $248.50 after commissions. QCOM kept falling all the way down to 41.44 before rebounding back above yesterday’s closing price.
This is important to note – had I only looked at the option’s high/low of the day after market’s closed I’d have seen that I sold at the high of the day, but by checking the underlying’s price action I can see that I could have done better. Nobody else took advantage of the dip, but the bid/ask reached a decent amount higher as you’d expect.
The QCOM chart actually looks like it could head back down to 35 again if it doesn’t break its current trading range, but this is one of those stocks that I think has a good floor and more upside potential. I’m not convinced it’s shooting to the stars any time soon, but should stay up long enough for me to profit from this trade. If not, I’ll take the assignment and sell covered calls.
If QCOM makes it up to 45 again, I might consider selling uncovered calls at the 50 strike since I think the litigation will continue to hold it back from moves that high and that fast.
Lastly, I have to brag on myself one more time for my call that VIP was ready to break out. It was up more than $2 before 10:00 am today before retreating some. It’s still up more than $1.20 and I’m now sitting on a paper profit with my remaining call and puts.