The Money Tree

Safely Generating Income in Retirement

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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7 Responses to “New Trade – QCOM”

  1. Dieter said

    Hi Troy,Long time no hear. Well come back. Good decision on QCOM . Placed a Jan17 BCS and sold the Jan17 62.5 put as well myself. Looking forward to hear from you. Need now any advice let me know. Dieter Kolberg

    Date: Fri, 30 Jan 2015 01:41:10 +0000 To: yodiet@live.com

  2. Jeff said

    Hi Troy,

    Just read your post — I see any new posts you make on my netvibes.com aggregator. Like your conservative QCOM position and just joined in with you on this one. STO Feb2015 $62.50s @ $1.60. I also like that they go ex-div @ $.42 on Mar 3rd, so if stock closes below $62.50 at Feb expiration, then I can sell some in-the-money calls against if for the Mar2015 expiiration.

    Best regards,
    Jeff

  3. Jeff said

    Troy,
    Good news for QCOM stock (and therefore us as well) yesterday — thanks Microsoft!:
    Qualcomm Inc. (NASDAQ: QCOM) dropped less than 1% on Monday to establish a new 52-week low at $62.26 against a high of $81.97. Volume was about 50% above the daily average of around 12 million shares. The chipmaker started out slow on lingering questions about the impact of Samsung’s decision to cut its business with the company, but shares finished the day up nearly 5% on a report that a new Microsoft phone will use the chip.

    • mounddweller said

      Jeff,

      Yes, I thought the sell-off because of the Samsung announcement was over done. A company usually has more than one major customer and usually is pursuing deals with many more. In this case it was MSFT. In the coming days, I’ll be looking to buy back my $60 puts for $0.10 or less.

      Regards,
      Troy

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