The Money Tree

Safely Generating Income in Retirement

Archive for January, 2015

New Trade – QCOM

Posted by mounddweller on January 29, 2015

 

 

Fellow Traders,

Yes, it really is me and I’m really going to post something to my blog.  My apologies for the extended hiatus.  The reason I haven’t posted anything of late is because I haven’t been doing any trading.  I’ve continued to follow the market but wasn’t finding anything that I felt was worth risking my hard earned money on.

The increased volatility is starting to make that change.  More and more stocks are selling off from their multi-year highs and are beginning to hit major levels of support, either in the form of a 200 day moving average or previous support levels.

Today I used the huge selloff in QCOM to stick my toe back into the water so to speak.  I started with a very small trade, selling only 2 contracts of the QCOM FEB $60 put for $0.65.  If the puts expire OTM my ROIC will be 1.08%.  With only 23 days to expiration my annualized return is 17.2%.

Below is a 3-yr chart for QCOM.  As you can see there is plenty of support for QCOM at $60.

BLOG - QCOM 3 yr chart

I executed my trade very early in the trading day.  At 9:38 am ET to be precise.  Hindsight being 20/20, as you can see in the 1-day chart, it is clear that I was early in the trade.  Had I waited until later in the day I would have been able to get a great deal more for the FEB $60 contract.  However, at the time of my trade QCOM was at $64.42, 9.3% below the previous day closing price of $70.99.  That’s a huge one-day drop for a blue-chip stock like QCOM.  I felt QCOM couldn’t fall much further.  Also, since I still have a day job I couldn’t sit and stare continuously at my trading platform waiting for the stock to hit the very bottom for the day.

By the end of the day QCOM finished well off its lows.  Thus, I am very comfortable with my entry point.

BLOG - QCOM 012915 chart

My plan is to buy back the puts at $0.10 or less before expiration.  If QCOM closes below $60 before expiration I will roll the puts out and down, possibly adding more contracts as necessary to maintain a net credit on the trade.  However, given the current ‘up one day, down the next’ volatility we’re experiencing right now in the market I don’t think that will become necessary.  I think QCOM will bounce significantly before expiration.

Best Regards and Good Trading,

Troy

 

 

 

 

 

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