(Trade Alerts) Option Selling: Cash-Secured Puts On Plug & Play Stocks

Summary

  • Market breadth is on a peak plateau, but there are still a handful of opportunities to generate income and gain favorable entry on select stocks.
  • I recently covered stocks for a correction, you can already sell cash-secured puts on several, which I cover today.
  • This week we cover: GOLD, NEM, GLD, GDX, NTR,.
  • Also find a link to this week’s Option Selling Call webinar to help out.

Each week I cover several option selling ideas for retirees and near retirees for income generation and risk management.  Selling covered calls and cash-secured puts are great strategies for people with six and seven figure accounts.  

Broadly speaking, professionals sell options to the speculative public. You are taking the “house” side by being an option seller rather than a buyer. If you are looking to increase portfolio income and manage risk, then using a systematic approach to option selling is a great tool. 

Option cycle

Make sure to read Selling Covered Calls & Cash Secured Puts which is also found in the Resources menu, before getting started. 

Cash-secured Put Ideas

We write cash-secured puts on stocks that we believe are undervalued, as well as, not overbought in the short-term. Our goal is to own stocks. Selling cash-secured puts is essentially a way to get paid for a limit order. Only sell cash-secured puts with a strike price that you are happy to own the stock at.

We have discussed AT&T (T), Kinder Morgan (KMI) and Barrick Gold (GOLD) recently. You can sell at the money cash-secured puts on all three for February or March if you do not have full positions in any of those.

In coming days, I will be writing articles on the Seeking Alpha free side about cash-secured put ideas for AT&T, Kinder Morgan and Barrick Gold. You should already be an investor in all three companies if you are going to be at all. If you need to make a trade, I suggest doing it now before those articles are written as they normally get well over 20,000 views.

This week we list several stocks on the Plug & Play that are at or near their buy zone which we have not covered recently.

MP Materials (MP) – Selling the March $30 puts around $3. 

This roughly a 10% premium for about 6 weeks holding time. That equates to around a 80% annualized return. Returns that large are indicative of volatility, so be aware, this should only be a portion of scaling into an MP position in case it does head down to the low $20s per share.

MP is in a consolidation phase as it digests the big gain. The Bollinger Bands are signaling a break in one direction or the other soon, which is also what the descending triangle is showing. 

https://www.tradingview.com/x/tbOCLElt/

Ford (F) – Selling March $10 puts for about 50¢

This is about a 5% return for holding about 6 weeks. Annualized that is around a 40% return on money held in your money market in case you have to buy it. That’s also indicative of increased potential volatility, however, not huge.

Ford’s CEO recently stated that Ford is moving in the direction of being all EV right after the deal with Google (GOOG) for technology. I think it is only a matter of time before Ford takes off as people shift Tesla (TSLA) profits to other plays.

It really looks like it could rally to low teens then $20ish pretty quickly. There might be one or two more pullbacks, which is indicated by the minor negative divergences in MFI and CMF. Overall, investor interest has really been building though. See the activity on the right side between about $9 and $10/share. 

I really like selling these puts and making Ford a full position around $10/share. Another high conviction pick. 

https://www.tradingview.com/x/XcQmyiV9/

Lumen Technologies (LUMN) – Selling March $10 puts for around 50¢

Will have to set a GTC order to get it on volatility. Not super high conviction, but not much risk and if you get it down there, that’s a great price. Gigantic support around $10/share.

Create your own dividend on it by getting paid to essentially set a limit order. There is a lot of room to run at some point (like after it disposes of consumer division) before it hits big resistance in the $40s. 

You could sell $12.50s if you were a bit more daring and want the stock put to you for the dividend. I think that’s a pretty good idea too. Maybe a little of each. Make sure to ask for the ask or a bit more on a GTC order.

https://www.tradingview.com/x/ew1ZxzOd/

Covered Call Ideas

We write covered calls on stocks that we believe are overbought in the short-term that could experience a stall in appreciation or a correction. If a stock you own is called away, you can always then sell a cash-secured put on a pullback, or buy the stock back outright.

With many stocks being overvalued today, as well as, many stocks being or approaching overbought levels, there are literally hundreds of covered calls that you can write on your portfolio now.

Look for stocks you own that have RSI on weekly chart close to or over 70. Exclude stocks that you think have huge growth upside (like Ford). Then sell very close to the money for March. You do better selling 1-2 month options repeatedly than selling longer duration options less frequently. 

Here’s an example of a stock I found easily on my TradingView screener

PTC (PTC) – Sell March $140 covered calls around $7.

Notice the overbought signals on RSI, MFI, CMF and stratospheric MACD. Plus, who’s left to buy it up here? Not institutions. 

I would sell covered calls on for a significant portion of a holding, though not all because it could run a bit further. 

https://www.tradingview.com/x/ho23i9N1/

And another example: 

Invesco (IVZ) – Sell March $22 covered calls for about $1.10+

Invesco isn’t likely to do a strategic transaction at this point and if it does I’m not sure it’s a great idea the market will like. I think their best bet is to just outcompete other firms for assets and cut headcount. But, that’s a slow process. The easy money has been made on Invesco in my opinion.

https://www.tradingview.com/x/MMSoku1i/

Option Selling Call Webinar 

Disclosure: I am/we are long T, KMI, F, GOLD,LUMN.

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