Yum Stock has been in my portfolio a long time. The goal has been to use Put Selling to earn income and use the Bollinger Bands Trade Strategy to earn some capital gains but to not hold stock for more than a few months. Yum Stock plunged last week on the release of an earnings reduction announcement where Yum Stock is looking for a 4% decline in overall restaurant sales in China.
This made for some excellent Put Selling opportunities last week which I posted an article about as I did Put Selling out of January 2013 at the $60 put strike.
Yum Stock Bounce
This morning the chief executive of Yum Brands Inc said he is “very confident” that the operators of KFC and Pizza Hut eateries will turn in very solid sales at established restaurants in China in 2013. David Novak the Yum Chairman and CEO was speaking at the company’s annual investor meeting in New York City, when he said that he expects the first half of the year in China to be weaker but stronger in the second half.
Put Selling Against The Yum Stock Chart
The recent YUM Stock decline pushed the stock down 12.5% in just 3 trading sessions. On Dec 4 the stock set an intraday low of $65.35. A couple of key aspects for the stock are:
A. Momentum after the intraday low on Dec 4 has turned back up and after the CEO’s announcement momentum turned positive.
B. The Slow Stochastic hit extremely oversold on Dec 4 and bounced back the very next day. Again the CEO announcement has turned the Slow Stochastic higher and issued a buy signal on the stock.
The recent decline in YUM Stock has created a number of Put Selling opportunities
Bollinger Band Strategy Trade On Yum Stock
The Bollinger Bands Strategy Trade was put in place this morning on Yum Stock. As this is a members only strategy, FullyInformed Members can review the latest Bollinger Band Strategy through this link.
Yum Stock Put Selling Strikes
For investors interested in Yum Stock, I am Put Selling at various support levels in YUM Stock. After Put Selling throughout the year I am now holding naked puts at the Dec $62.50 level and January $60 and $57.50.
The one year chart on Yum Stock below shows the support levels in the stock. I am continuing to stay at the $60 to $57.50 levels and sell only the $62.50 puts when the stock is in an uptrend, which at present it is not.
One Year Support Levels In Yum Stock
Put Selling Yum Stock April and Beyond
I believe YUM Stock is only worthwhile Put Selling the larger dips. The April $57.50 yesterday could have been sold for $1.30 which is about half a percent a month. Personally I need to see further weakness to make Put Selling April and beyond worthwhile. While $60 and $57.50 are support this year, should the earnings decline be larger than the 4% anticipated, the stock could easily fall below $60 and make the $55.00 and $52.50 put strikes very attractive. I prefer to stay within a few months at best and wait to see how the stock can perform. By keeping within 3 months it gives me opportunity to roll down and to also bring in decent premiums for a shorter period of risk to my capital. Yum Stock has become one of my larger Put Selling trades with my capital in the stock at risk now up to over $140,000.