Intel Stock Roller Coaster Means Changing Put Selling Strategy

Intel Stock has been in my portfolio since March 2010. While many analysts are busy pushing Intel Stock as being undervalued, I believe fair value is $26.00 to $24.00. With those values in mind I have been put selling against Intel Stock all this year within those valuations. While the stock market was climbing and Intel stock along with it, I did not mind put selling 10 contracts one and two months out in a leap-frog style. For example I was put selling in January 2012 and sold Feb $24 and March $25 naked puts. Then in Feb I sold into April, while still holding March naked puts and so on.

Intel Stock Put Selling Strategy To May

This strategy works but usually only in a uptrending market. Since May Intel Stock has been on a roller coaster, falling down to just below $25 at the start of June and back up to $27.75 on June 20 2012. This requires a change in my put selling strategy for Intel Stock.

Intel Stock Put Selling In This Correction

The nice thing about this correction is it is pushing Intel Stock around a lot more and should move it back into fair value which I estimate to be between $24 to $26. However a correction also means being careful not to be assigned shares at too high a valuation. I will not be put selling above $26.00. As well I have changed to selling smaller groups of naked puts to keep more capital aside for put selling at a variety of strikes as the stock fluctuates. That means no more selling 10 naked puts, but reducing the number of put contracts sold to 5 each time.

In a correction stocks can fall further than you would expect. Intel stock is no different and it could easily fall back to $24.00. My plan is to sell naked puts in groups of 5 between the strikes of $26 to $24 and if Intel Stock should fall to $24, I will sell puts at $23.00. As well I will keep my put selling as short as I can and no further out than 2 months. If I have to roll my naked puts if Intel Stock should fall and leave them in the money, I may have to at that point, roll out further than 2 months to roll down for a net credit.

Put Selling Intel Stock On June 21

The above Intel Chart shows the Put Selling Strikes of $26 and $24. I also plan to sell puts at $25

With that in mind, today I sold July naked puts at the $26 strike. I sold them in the morning but too early as I did not anticipate the market selling off as bad as it did. However as I sold just 5 naked puts, I am pretty comfortable with these positions. I will not be selling more naked puts at $26 until these expire so even though later in the day I could have sold more puts at the $26 strike for .50 cents, I did not. It is important to hold to the discipline of the original strategy which is put selling at $26, $25 and $24 put strikes.

On the Options Forum a member commented that he wondered why I had done put selling now when the technical timing tools show the stock could fall further and I could sell naked puts at lower strikes. He was absolutely correct. The technical timing tools showed that Intel Stock could fall further. However my goal is to set up a string of naked puts at $26, $25 and $24. On Thursday’s selling I thought Put Premiums looked pretty good for Intel Stock and sold too early. It shows that paying attention to the overall market trend and the technical timing tools is worthwhile.

Intel Stock Naked Puts Held

I am presently holding naked puts for July at $24 and $26 strikes. Should Intel Stock fall further I will try to sell the July $25 strike depending on put premium available for put selling Intel Stock probably next week.

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