Sold VIA March Naked Puts

Viacom (VIA) is another one of the stock picks I grabbed from Barron’s Round Table issues.  Mario Gabelli picked this one.  His reasoning, among other things, includes the cash VIA generates from advertising and subscriptions.  It’s had a huge run over the past year and I’m banking on this huge cash flow to at least keep VIA above $30 through March options expiration.  I tried a limit order on VIA yesterday, but it was set too high apparently.  Originally I had my limit order in for three naked puts for $1.00 each, just good for yesterday.   I watched it today to see if the market was going to roll over and after seeing it hold on I reduced my limit price and size of my order and it hit.  While VIA was trading at $31.20 I sold two VIA March 30 naked puts at $0.90 each and received $178.60 after commissions. 

(If you missed the announcement the naming format for options has changed from a 5-character symbol format (i.e., the OPRA code) to a more descriptive 21-character format.  I won’t be including the new 21-character format in my posts since I write out the option description anyway.)

VIA topped out at $33.05 on November 16th and has been stuck in a sideways, slightly down, trading channel since then.  It’s at the low end of that trading range right now which should make the path of least resistance higher in the near term.  Getting down to my strike at $30 would be close to a 10% correction for VIA from its intraday high over two months ago.  It’s moving so slowly down that my new March options could expire before it creeps down that low if the trading channel doesn’t break.  If it does get assigned I’ll have to decide if I think Gabelli is right and VIA has a chance to double in four years.   Before that happens, I see support coming from the 100 day moving average (currently at $30.66) which made me go ahead and make the trade today.  I was messing around with different chart views after I saw the 100 day moving average to see how far back it went as support and noticed the 200 week moving average has been very close to the line of resistance for VIA over the past few months.  I don’t typically watch the 200 week moving average, but found it interesting that it just happened to show up where VIA hit resistance.

The majority of my naked puts are now in the money and I’m still not convinced this dip in the markets is over yet.  The S&P 500 closed within less than half a point from its close on Friday and that was after it hit a new recent intraday low.  I kept this trade somewhat small to be sure I had more cash available if we go much lower.  I’ve been on an option selling spree recently and should probably let the dust settle some before getting overly committed.  At least the VIX is back up again which helps with higher premiums to sell now.  This VIA move gave me a little diversification that I needed.  I’m still looking for another move outside of the sectors where I already have exposure, but will probably make it a small trade again.