Intel Stock as regular readers know has been in a decline since May and in a serious pullback since August when it warned third quarter earnings would not meet expectations. They also removed forward guidance of earnings which is always a tough sell to investors. Regular readers also know that I am holding lots of Intel Stock naked puts stretching from $26, all the way now down to $21 as of today.
Today I sold into November at the $21 strike. Intel Stock has a lot of strength and if the stock gets down to $21 the dividend itself is 4.2% and growing. I would be pleased to keep rolling Nov $21 puts out months if need be. With the stock last Thursday (Sept 27) showing possible signs of bottoming I took advantage and did more put selling into November. The $21 strike interests me as it is below long-term support at $22.00.
Intel Stock Day Trade
As well, using the Relative Strength Index (RSI) and Ultimate Oscillator strategy discussed on the Members Section of my website, I bought 500 shares of Intel Stock for a day trade. I did not anticipate that the stock market would take off in the afternoon on the news that the US economy “found” another 355,000 employed workers. How does one find missing workers? To read the Relative Strength Index (RSI) and Ultimate Oscillator strategy select this link. Using that strategy makes these kinds of day trades simple and straight forward.
Intel Stock Chart Analysis
So how is Intel Stock doing? Lately Intel stock is showing signs of perhaps bottoming. $22 marks long-term support in Intel Stock but $21 which Intel stock has not seen since September 2011, I believe offers a lot of value which is why I picked the $21 put strike to sell.
When selling puts out of the money on a declining stock, it is important to have a plan, no matter how simple, in place before starting the trade. In my case I sold the November $21 Intel Stock put strike and should the stock fall that low I will once more move to a rolling strategy. I have a lot of comfort at the $21 level for rolling Intel stock as much as possible until Intel Stock recovers.
Intel Stock 3 Year Chart
Intel Stock 26 Naked Puts
Looking at the above Intel Stock chart you can see that the $26 level has very limited support. I am holding a reduced number of naked puts at $26. On my roll last month I reduced the number of put contracts I had originally sold against Intel Stock when I rolled further out in time. Looking at the above chart, I can tell that once I have reduced the number of naked puts contracts down to about 2 to 4 contracts, I will then have to roll out and lower unless I do not mind owning shares at $26.
The importance of having a plan cannot be understated. In September I had 10 Intel Stock naked puts at $26. Today I have 9 naked puts for December at $26. With each new roll the number of puts at $26 will reduce. Then when the number of put contracts is down to that magically 2 to 4 number I will roll out and further down. Consider that on the first Put Selling for September I invested $26,000. Now there is $23,400 invested at $26. Eventually when there is just 4 puts there will be only $10400 invested. Meanwhile the capital that is released with each roll and reduction of put contracts is used to sell more Intel Stock puts at lower out of the money strikes. This means of course that if assigned at $26 on perhaps 4 puts, I will be busy selling 6 more puts at maybe $21 and continuing to generate income. If I took assignment of the remaining shares at $21, my position would look like this:
400 shares at $26
600 shares at $21
Average share price = $23.00.
If Intel Stock stayed around the $22 strike it will be a simple matter for me to sell in the money covered calls at $22 and eventually be exercised out but hopefully not before I get a dividend or two. The strategy shows that despite the drop in the stock, I am basically reducing the amount of capital that is in the money and increasing the amount of capital that is out of the money.
So you see, having a strategy makes all the difference. It allows me to sleep nights, remain focused on my trade and because I have done these Put Selling trades for years I know that the outcome will benefit my portfolio down the road.
Intel Stock Trade Summary
In the next article on Intel Stock I will be looking at rolling options strategies to show how I decide when to roll to avoid assignment, how to beat those dividend hunters at their own game and how to keep on rolling for years if you have to or just plain want to.