Clorox Stock Weakness Results In New Put Selling Trade

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Clorox Stock symbol is CLX. I have watched Clorox Stock for the past few trading sessions. I am still holding September $67.50 naked puts on Clorox Stock which I expect will expire the next week. Today though with Clorox Stock pulling back 1.5% I decided I could take a small 5 naked put positions and do some more Put Selling in Clorox Stock. This time I picked out to January 2013 at $67.50 put strike. I plan to do more Put Selling in Clorox Stock but I want to wait until I either buy back the September $67.50 naked puts for what I believe will be pennies or let it expire worthless.

Clorox Stock and Buying To Close Naked Puts For Pennies

I would almost always buy to close my naked puts when they result being worth just pennies. In Clorox Stock the September $67.50 can be closed for .05 cents which I almost always do. The problem right now though is I have a lot of capital that is not invested in naked puts. Therefore there really is little need for my closing the September naked puts unless another opportunity arises. With the Fed news yesterday the chance of the stock market having any kind of free fall is probably less than one tenth of one percent. This means holding onto some put positions longer while waiting for new Put Selling opportunities to arise. As soon as I see some new Put Selling opportunities, whether in Clorox Stock or other stocks, I will close some of the nickel buy back naked put positions to free up that capital for more Put Selling opportunities.

Stock Technical Analysis of Clorox Stock

Finding the proper support levels in Clorox Stock is key to profitable Put Selling with limited risk of stock assignment. By selling at support levels, should Clorox stock fall beyond those support levels, I know I have a good chance of selling covered calls at support and be exercised at some point from Clorox Stock. If you recall from my 2012 Trades on Clorox Stock, I am not interested in holding the stock. I am only interested in Put Selling against the stock. To that end I was selling the $65 put in Clorox Stock consistently earlier this year. I then switched to the $67.50 naked put as Clorox Stock rose.

Studying the charts and volumes to assist with stock technical analysis, I have identified two support levels in Clorox Stock for Put Selling. The first is at $67.50. You can see in the chart below that this support is primarily from 2011 and the Spring of 2012. I believe however that $67.50 while a support level in Clorox Stock is not nearly as strong as $65.00. If Clorox Stock should break $67.50, I do believe $65 is the support level to watch in Clorox Stock.

Clorox Stock Chart Since 2009

For Put Selling I have identified two support levels of interest in Clorox Stock.

Clorox Stock 3 Month Chart

For further stock technical analysis let’s look at the 3 month chart of Clorox Stock. The stock has been in a fairly tight trading range for the past three months and is presently declining. There is weak support at $70.00 left over from earlier this year. I believe if the stock fell to just below $70.00, some selling would emerge as investors at that level would panic to get out. That could push the stock to below $69.00 which would push up the $67.50 put strike which I see as the first level of decent support in Clorox Stock.

Presently though the stock while under pressure could also be ready to bounce back. All three technical indicators, the Ultimate Oscillator, Fast Stochastic and Slow Stochastic are signaling very oversold conditions for Clorox Stock. Often an extreme oversold condition is followed by a bounce in the stock itself.

Meanwhile the volume technical indicator does not show a lot of buyers on the 4 dips in the stock during the past 3 months. There is buying, but when looking at the numbers, each of the pullbacks has seen more sellers than buyers. There have been 35 selling or distribution days indicated by the red bars in the volume indicator and 29 buying or accumulation days, shown by the green bars.

This is why I have stayed away from Put Selling the $70 strike. I believe there is a good chance for the stock to break the $70 naked put which would make the $67.50 put strike excellent for put selling. Meanwhile though I am keeping some income coming in by Put Selling further out in time at the $67.50 put while waiting to see if the stock breaks $70.00. If it can then I should be able to return to Put Selling the $67.50 put strike but one or two months out and not further.

Stock Technical Analysis of Clorox Stock

The 3 month chart of Clorox Stock shows some weak support at $70

Put Selling Clorox Stock Today

Today I looked at the stock technical analysis and determined there was a very good chance Clorox Stock would bounce back yet again. As I do not want to engage in Put Selling at the $70 strike because of possible assignment reasons, I feel quite comfortable selling 5 naked puts out to January at the $67.50 strike for $1.32. This is only 1.95% for 4 months but I am not concerned about the percentage gain on the trade. Instead I am using this Put Selling opportunity to simply add more capital to my portfolio by holding what I think is excellent and reasonably safe naked puts while waiting for the stock to possibly break the $70.00 price. If it does then I will commit more capital to my Clorox Stock Put Selling trades.

Trading this far out of the money on Clorox Stock is never going to make an investor rich. Far from it. But it can be used to boost the capital in my entire US Stock portfolio and with so much capital in my portfolio to put to use, I think Put Selling Clorox Stock for a handful of naked puts at $67.50 makes a lot of sense.

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  • Dave Johnson

    Beautifully written, Teddi. Just clear as a bell. I am taking this trade on Monday if I am not too late.

  • Thanks Dave. The stock looks oversold at this point so Monday may bring a bounce. Never a need to rush for Put Selling though as I am sure another opportunity will arise.

  • Kraft stock is a bit of different story. With the impending split it is tough to say which way to go on Kraft. I think Put Selling is okay when the stock is down but today it had a terrific run back up. personally perhaps credit spreads are better right now on Kraft Stock. I am undecided as I like the snack food side better than the grocery side (so I think), but I would need to see financial results first to confirm my suspicions.