I’ve mentioned a couple of times recently that I was considering QCOM as one of my next trades. I finally got around to it today. While QCOM was trading at $54.27 I sold one QCOM August $52.50 naked put for $1.80 and received $179.64 after commissions. I only sold one contract to start with and if assigned will be comfortable selling a strangle for another put and covered call if assigned and then would be closer to a full position. I don’t actually expect this put to be assigned though. QCOM has shown good support around $52.00 a few times this year and I expect it to hold again. If $52 doesn’t hold I’ll be surprised if $50 breaks after that. $50 marks the low for the year on a short pop lower in March. I expect any moves below $52.50 (if we get another one) will be short lived and will just be another buying opportunity on QCOM. QCOM even pays a dividend of almost 1.6% which should give it somewhat of a floor at some point during a slide.
Like QCOM, I’ve sold options on CSX in the past too and think the risk/reward for coming back to it favors selling puts again. CSX stock split 3 for 1 a week and a half ago and makes it an easy stock to take a small position on and stay patient in riding it out. While CSX was trading at $24.97 I sold one CSX August $25 naked put for $1.15 and received $114.64 after commissions. With CSX being less than half the price of QCOM I have plenty of cushion for it to fall some, assign 100 shares, sell a strangle and then even do the same one more time before I reach a full position in CSX. That said, I see the downside risk for CSX as fairly limited. $24.00 has been very solid support for months and I see no reason that should change in the near term. If $24 breaks support then $23 is right below it and should be the next level of support before buyers return CSX to higher levels. I’m not overly optimistic for CSX to take off much higher though. $26.00+- looks like a tough area for resistance. This trading channel makes CSX a great candidate to sell puts on. If it can stay in this channel for another eight weeks I’ll be ready to repeat the order. CSX’s dividend yield is slightly more than 1.9% and will help provide some support if CSX drops beyond my expected floor.
Next up on my hit list might be another put on UWM. I charted the Russell 2000 Index yesterday and with today’s continued strength I am much more comfortable adding some more exposure. I might go as near term as October. We’ll see what kind of trade I can get to hit. August might end up a better play. It won’t be today, but see this week as highly likely to make the trade.