I read a bullish article in Barron’s this past weekend on Kraft (KFT) and put a limit in to sell naked puts if it dipped. The chart showed it had room to come down and any time I see a bullish article in Barron’s or another rag I try to wait a few days for any short term bounce it has to wear off.
I priced my limit to hit somewhere close to its 10 day moving average. This morning KFT crashed through its 10 day moving average and hit the 20 day moving average where it found support, below my strike. While KFT was trading at 32.18 I sold three KFT July 32.50 naked puts (KFTSZ) and received $362.75 after commissions.
My second trade in the same account today was a different one than I usually make. I’m putting my money where my mouth is on this one based on my chart of the S&P 500 last week. I used a major S&P 500 ETF, SPY, to play the chart. When I charted the S&P last weekend I said it looked due for a pull back. It spiked briefly on Monday and hit the upper trend line intraday and then continued south all week to hit the lower trend line of higher lows this morning. I took the opportunity while SPY was trading at 31.80, I BOUGHT two June 142 SPY calls and paid $201.49 with commissions. If SPY can follow its chart back to the upper range of its trading channel it should go north of 144 within the next couple of weeks. If I can make a quick $100 on this trade I’ll probably take it and get out. I opted not to sell naked puts on it for the fear that the market continues down. I’m only risking $201.49 to the downside and if I see a strong turn back up could make a few hundred dollars if I don’t sell early.