Intel Stock And Rolling In The Money Put Options

Intel stock had a nice up day yesterday but it was the last push from those investors who are still celebrating Intel Stock’s earnings which were better than expected. Technology stocks in general did well yesterday but any weakness in the markets is going to bring selling into technology stocks and today Intel Stock was down 1.90% at the time of my writing this article.

I am holding Intel Stock naked puts for July options expiry at the $24, $25 and $26 put strike prices. If I was Put Selling with the goal of not being assigned Intel Stock I would definitely not be selling naked puts at the $26 strike. I might even consider holding back on the $25 strike and be Put Selling the $24 as risk of assignment is a lot lower.

However my goal is to earn income and reduce my eventual position in Intel Stock. It could take years before I am ready to accepts shares in Intel Stock. Actually it would be great if eventually I earn enough through put selling to pay for Intel Stock shares.

My Put Selling goals will mean rolling options will almost always be a part of my Intel Stock strategy.

Rolling Options – The Intel Stock $26 Put Strike

In today’s action I had already assumed I would have to buy to close my July $26 put options simply because technology stocks have been weak for some time.

Through the simple strategy of rolling options, I can roll out my July $26 naked puts from July to August $26.00. I want to stay at the same strike price for August. You will understand why once you read further down in the article.

Rolling options can be very profitable if you have your goals in place and know why you are rolling options to the strikes you have picked, in advance of actually doing the trade. In my case I want to stay at $26 until either Intel Stock moves above $26 or it falls to below $25 and stays there. Either of those will be my cue to stop rolling options at the $26 strike and pick a different strike.

Rolling Options Today

For rolling options, I waited for Intel stock to move higher in the morning. Intel Stock moved up to $26.90 but I closed a bit earlier and paid .15 cents.

I had a lot of confidence that Intel Stock would pull back just based on my market timing / market direction indicators. This is why every night I take time to review my market timing indicators. Most stocks follow the overall market trend. Technology stocks has been particularly weak in every pullback during this summer correction.

By every day taking time to look at the market timing indicators and see what they are predicting for market direction, I have a lot of confidence in where I think stocks are heading. This makes trading options a lot simpler.

Therefore I held off and within about an hour Intel Stock fell lower. I then sold the August $26 put options for .90 cents. Again I was a bit early as I could have receive .98 a little while later.

To understand more about Rolling Options you may want to consider this article on rolling options with CVX Stock. Another interesting rolling options article is this one on rolling options for losses with XOM Stock.

Why Rolling Options With Intel Stock

Here is why I continued with the $26 Intel Stock Naked Put Price.

Having A Plan When Put Selling

The importance of having a plan and establishing clear goals is essential to proper investing and consistent earnings. My goal for Intel Stock, as explained, is to earn income to help lower the cost of entry into Intel Stock. To that end I have earned $13,421.75 since starting my Intel Stock trades in 2010.

Presently I have committed $49,546.00 of capital to my Intel Stock trade. This represents about 6% of my portfolio.

Building In Some Protection In Intel Stock Through Put Selling Variety

When put selling against stocks, the best put options premiums are always at the money. I only sell at the money options on stocks I would own.

In order to be able to sell for the best premiums, I like to take the approach of adding a variety of put option strikes to my trade. This is why I am presently holding the $24, $25 and $26 Intel Stock put strikes.

But if you look at my capital you can see that there is not an equal allotment to each of the put strikes.

I am selling 5 naked puts at each of the $25 and $26 Intel Stock put strikes, but the bulk of my capital is for the lower strike, namely the Intel Stock $24 naked put strike.

Presently my Intel Stock capital is allotted this way:

$13013.25 for the $26 Intel Stock put options strike

$12513.25 for the $25 Intel Stock put options strike

$24019.50 for the $24 Intel Stock put options strike

My total capital committed to Intel Stock put options is $49,546.00. If I was assigned on all the strikes I would end up with 2000 shares of Intel Stock with an average valuation of $24.77. So you can see that my average value is on the low side of the strikes I am selling but I am still able to sell the at the money put strike, namely $26 without worrying that I am going to be assigned at high valuations.

Remember This Intel Stock Chart?

Readers might recall this Intel Stock chart showing support levels for the past 3 years in Intel Stock. The chart clearly shows that most of the support is Intel Stock is at and below the $24 strike. For investors who do not want to be assigned shares, there is little point is selling naked puts at $25 and $26. You can easily see how limited support is for Intel Stock at the $25 and $26 levels. But by keeping the bulk of my capital below those levels I can average into the stock at $24.77 which, while still on the high side, should allow me to sell covered calls if I was assigned on all 3 Intel Stock put strikes, $24, $25 and $26. It also doesn’t hurt that Intel increased their dividend another 7% starting in the next quarter. That should also assist in keeping the stock from falling much below $24.00.

The plan is to continue put selling the $25 and $26 Intel Stock put strikes as the stocks wanders in and out of the $25 to $26 range. This sideways action should keep volatility up in Intel Stock and option premiums as well.

Despite not having all my capital committed to the at the money put options for Intel Stock in July, I still earned $784.00 through put selling Intel Stock and I have the benefit of knowing that if something happened to Intel Stock and it fell below $24, my average valuation is $24.77 not $26.00

The $748 earned in July represents a return of 1.5% for the month which if it was repeated monthly would work out to 18%. If I could repeat this amount each month I would earn $9408.00 annually. I could theoretically own 1000 shares of Intel Stock at $26 within 3 years using other people’s money. Now wouldn’t that be nice!

Intel Stock Links

Review Intel Stock Trades For 2012

Review Intel Stock Trades For 2011

Review Intel Stock Trades For 2010