Sold CSX May Naked Puts

I’m finally back to my desk physically and probably 40% mentally.  My vertebrae surgery was a success (or so we think so far), but I had complications the following week and had to go back into the hospital for two extra nights due to some serious swallowing problems.  Without going into much of the details on it, I’m still on a liquid diet, have lost a lot of weight, still medicated and under rested.  I’m not stating all of this for pity, but to explain my absence and why my posts might seem more stream of conscious than usual.

Anyway, the good stuff – I’ve been watching the markets as much as possible and have been growing increasingly more bullish even after already getting fully invested recently.  After INTC and CSX did so well with earnings yesterday I knew I wanted to get in deeper.  I still have INTC naked puts that look destined to finish out of the money, so I turned my attention to CSX.  I got stuck in a meeting at 9:30 and couldn’t get my trade in right at the market’s open, so I entered a limit order and waited for a dip.  By a couple of minutes after 10:00 am, while CSX was trading at $54.38 I sold two CSX May $52.50 naked puts at $1.05 each and received $208.57 after commissions.

I see potential technical support around $52.50 which makes this seem like a fairly safe trade for me.  Along with the technical view, I like the strong fundamental picture CSX is painting from their earnings call.   The 1.8% dividend yield is another nice piece of the puzzle.  CSX’s P/E ratio is lower than its competitors’ average which also added to why I went with it versus another rail-based transportation services company.

By selling the naked put out of the money I am giving myself more than a 5% cushion before this position turns break even.  I was tempted to sell the $55 strike, but continue to wonder if we’re starting to get fully priced in for where the market should be.  I think we have more room to run, but since I’m already fully invested I don’t have to take large risks.  Little nibbles will get me to where I need to be with less risk.

While I was in the hospital last week I missed my three year blog anniversary.  I started this blog after my initial vertebrae surgery and now it’s lead to a career change for me as an Investment Advisor.  I never would’ve guessed I’d have made a move like that, but it’s been fun growing.  Thanks to all of you who continue to come back to these pages, read and provide feedback.  I’ve learned a lot from many of you as I hope you have from me.