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YUM! BRANDS  
My Perspective

Yum Brands controls 5 different concepts. KFC, PIZZA HUT, TACO BELL, Long John Silver and A&W. YUM Brands now has 36,000 restaurants in 110 countries and continues to open more outlets every month.

Through the five concepts of KFC, Pizza Hut, Taco Bell, LJS and A&W (the Concepts), the Company develops, operates, franchises and licenses a worldwide system of restaurants, which prepare, package and sell a menu of food items. The Company either operates units or they are operated by independent franchisees or licensees under the terms of franchise or license agreements.

In addition, the Company owns non-controlling interests in Unconsolidated Affiliates in China who operate similar to franchisees. YUM's business consists of three segments: United States, YUM Restaurants International (YRI) and the China Division. The China Division includes mainland China (China), Thailand and KFC Taiwan, and YRI includes the remainder of its international operations.

Recently I watched a special on TV about Asia and people are lined up outside KFC, Taco Bell and Pizza Hut. In China KFC is incredibly popular. The sales figures show that while YUM is growing slowly in North America, they are growing rapidly in Asia. This company is growing.  

McDonalds has a market cap of 60.91 Billion. Yum Brands is now at 15.64 Billion and growing faster than McDonalds. Every year Yum Brands has increased its market cap. It is now 25% as large as McDonalds. It is definitely a large cap player and will be around for quite some time. While I am not interested in owning this stock, I donít expect any kind of dramatic sell off in the stock.

 

 

 
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By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not access or use this site.
Nothing presented is financial advice, trading advice or recommendations. Everything presented is the author's ideas only. The author accepts no liability for its use including errors and omissions. You alone are solely responsible for your own investing and trading. There are considerable risks involved in implementing any investment strategies and losses can be large. Trade at your own risk.

 

 

  YUM! BRANDS  (YUM) - 2010
ONGOING EVALUATION & TRADE
My goal for YUM is to collect income from naked put writing. When the stock gets over-valued (in my opinion) I will revert back to selling laddered naked puts to keep myself below the stock price to try to avoid being assigned at a too high a level. Should I get assigned I should be able to sell the stock through covered call writing as I will be in the low range for this stock. Yum's chart looks promising for selling naked puts consistently.
YUM TRADES BY YEARS
VIEW YUM-2011 TRADES
VIEW YUM-2010 TRADES
VIEW YUM-2009 TRADES
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Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use

 

 

YEAR 1: 2009 - Trade Commenced Aug 3 2009
Goal for 2009: 5% (5 months)
Strategy: Sell Naked Puts Until Assigned
 
Capital In Use At End Of 2009 30,000.00
Income Earned in 2009 (5 months) 1,397.25
Return On Capital in 2009 (5 months) 4.6%
   
YEAR 2: 2010
Goal for 2010: 12%
Strategy: Sell Naked Puts Until Assigned
 
Capital In Use At End Of 2010 45,000.00
Income Earned in 2010 5964.00
Return On Capital For 2010 13.25%
   

 

 

 

 

 
YEAR - 2:  2010
TRADE COMMENCED Aug 11 2009
GOAL FOR 2010: 12%

ONGOING STRATEGY - SELLING NAKED PUTS UNTIL ASSIGNED
    END OF 2009 - INCOME $1397.25                
Jan 15 10 35.67 Expiration: 5 NP Jan 34 Expired                
Jan 19 10 35.58 STO 5 NP Feb 34 @ .40 1.1     13.25     186.75 1584.00
Jan 19 10 35.58 STO 2 NP Feb 35 @ .65 1.8     9.50     120.50 1704.50
Feb 19 10 33.79 BTC 2 NP FEB 35 @ 1.30 (3.7)     9.50     (269.50) 1435.00
Feb 19 10 33.79 STO 2 NP APR 35 @ 2.05 (Keeping in mind that I am not interested in owning this stock, it makes sense to buy back these puts and roll out to April for even more premium) Remembering the goal of NOT ACTUALLY OWNING SHARES, this makes the decision process easy - just keep rolling. Should the roll finally not be of any value should the stock fall too low, then I will have built up enough premium to reduce my overall cost when or if I am finally assigned. I have to remind myself of the chart on this stock... basically it is really going nowhere fast and that means garnering premiums through continuously selling the puts. I am spread out now between 32 to 35 with small positions at 3 varying strikes. This month (Feb option expiry) two ended up in the money and 1 out of the money. So I can roll 2 forward and I sell 1 other position 1 strike lower than the 33, to try to keep at least one position out of the money. This is kind of like my hedge on this stock. While other positions may remain in the money and keep bringing in higher premiums, the out of the money position(s) bring in less premium but keep lowering my overall entry position should I get assigned early on the in the money positions. This approach has worked well for me in the past. It is true though that if I had all my contracts in together at one strike, in the money, I would garner more income and pay less commission, it would also expose me to assignment at a strike that is higher than the overall position I would like to take. By hedging myself with 3 different strikes, I can better control my actual entry cost and keep some of my capital in reserve through the selling of OUT OF THE MONEY naked puts. 5.8     9.50     400.50 1835.50
Feb 19 10 33.79 BTC 5 NP FEB 34 @ .27 (0.79)     13.25     (148.25) 1687.25
Feb 19 10 33.79 STO 5 NP MAR 34 @ .90 (Again this is the optimum strike point for now, so it makes sense to not be assigned but to roll forward for more premium. By staying At The Money, I am getting the very best premium available on the PUT and continue to increase my earnings, thereby reducing my overall cost when the day comes to take the assignment) 2.6     13.25     436.75 2124.00
Feb 19 10 33.69 STO 4 NP APR 32 @ .70  (With the stock churning away but going nowhere I am selling my next set of puts early as I expect the Feb 33 to expire worthless today. If by chance the stock fell and I was assigned at 33.00 I will take the assignment and sell the stock as soon as possible) 2.1     12.00     268.00 2392.00
Feb 19 10 33.79 Expiry: 4 NP Feb 33 Expired                
Mar 11 10 37.09 BTC 4 NP Apr 32 @ .10 (0.31)     12.00     (52.00) 2340.00
Mar 11 10 37.09 STO 9 NP Apr 35 @ .50
COMMENTS: Yum has set a new 52 week high recently and while I would like to move my put strikes higher I believe that prudence is to stay at the 35.00. The stock has moved 10% in one month and I do not believe it can continue. I am selling the Apr 35 but I will watch and roll this position should it be necessary if the stock moves lower. I sold 9 puts for April as I am expecting the 5 NP Mar 34 to expire next week. I have an offer to close the Mar 34 puts at .04 cents but no takers yet. I have 2 April 35 puts from my previous trade (see above)
1.3     18.25     431.75 2771.75
Mar 19 10 37.94 Expiry: 5 NP Mar 34 expired
Comments: With expiry I now have just two positions and they have ended up at the same strike - $35.00
               
April 6 10 39.80 REVERSE NAKED PUT LADDER ENDED
RISK AVERSION STRATEGY EMPLOYED
 
               

RISK AVERSION STRATEGY EXPLAINED

April 6 2010: Is Yum Becoming Overvalued? - RISK AVERSION STRATEGY NOW EMPLOYED
Yum is presently back touching the $40.00 value. The PE is at 17.84 times which is not over high for YUM but slightly higher than McDonalds 16.5X. Looking at the 5 year chart above, the stock is definitely sitting at the top of its past trading range. Earnings are stronger now than in May 2008 or October 2007 at which time the stock revisited this range. Looking at the 3 month chart below, I can see that the oversold condition has been worked out of the stock but momentum is definitely slowing. Today (Apr 6 2010) when the stock moved above $40.00, large selling volume entered, but the stock actually closed down just .24 cents or a little more than 0.60% to $39.80. With the strength of the down volume you would think this stock would have fallen at least a full percentage point if not more. In 2007 the quarterly dividend was .15 cents. In 2008 it was .19 cents and in 2009 it was .21 cents. Earnings continue to grow as does the dividend. Also, like so many USA corporations, much of YUM's debt has been refinanced at historical low levels due to the credit crisis and the historic low interest rates. This means stronger financial statements for YUM.
The answer I am trying to determine is if the stock is over valued or fairly valued. I felt at $35.00 the stock was fully valued and I had hoped to stay at $35 strike. In order to proceed with further naked puts, I would have to move to $37 strike to receive a 1% return. At $37 I am a bit concerned about a possible pullback. If you look at the 5 year chart you can see that I liked the $35 strike for puts as it is was mid-range for much of 2009. However to continue with YUM, I will have to move to the $37 strike. I will therefore reduce the number of naked puts being sold and the amount of capital being used in this trade. Unless I see a clear move by the stock to set a new range perhaps between $37 and $42, I cannot justify continuing to sell 15 monthly contracts. As well, my strategy of a reverse naked put ladder no longer can work as the advancement of the stock has reduced put premiums below the $35 strike to amounts not worthy of selling. Presently going out 4 months and staying at the 35.00 strike brings in just .50 cents which is around 0.35% per month or approximately 1.05% per year. This does not warrant even margin being made available, let alone actual capital. This means a change in strategy on YUM to a risk aversion strategy of selling only those puts that can generate at least 1% a month. This means reduced contracts, to help manage the risk of possible assignment at a higher strike than I would prefer. With a smaller number of contracts, should I be assigned at a higher price, I can continue to sell puts with additional capital, to average in at a lower price, should the stock fall.

 

 

Apr 16 10 42.70 Expiry: 11 NP Apr 35 expired                
Apr 19 10 42.44 STO 5 NP May 41 @ .60 1.4     13.25     286.75 3058.50
May 21 10 38.77 STO 10 NP JUN 38 @ 1.00
COMMENTS: I have rolled down 3 strike positions at a loss of .10 cents. However the 38 strike is a good spot to be in and I would own this stock at this price. I have therefore increased the number of contracts to 10 from 5. Should the stock recover during the day I will close the May 41 puts as they are in the money.
2.6     19.50     980.50 4039.00
May 21 10 40.15 EXPIRY: BTC 5 NP May 41 @ 1.10 (2.6)     13.25     (563.25) 3475.75
Jun 4 10 40.90 BTC 10 NP JUN 38 @ .30
Comments: Originally I sold this put for 1.00 on May 21. Here I am just a few days later and the profit is 70%. I have closed these puts to look in the profit and moved to July 35.
(0.7)     19.50     (319.50) 3156.25
Jun 4 10 40.90 STO 10 Naked Puts (NP) JUL 35 @ .50 1.4     19.50     480.50 3636.75
Jun 21 10 43.24 STO 10 Naked Puts Jul 40 @ .40 1.0     19.50     380.50 4017.25
Jun 29 10 39.40 BTC 10 Naked Puts Jul 40 @ 1.05 (2.6)     19.50     (1069.50) 2947.75
June 30 2010: Yesterday I closed my July 40 naked puts and rolled to August 39 for an extra 1.00 in premium. If this volatility keeps up this could really assist my positions with YUM. Looking at the chart we may have some clue as to where YUM could eventually be heading. Back in Jan the stock was trading between $35 and $36. The 200 and 150 day averages are between $36 and $38. If it follows much of the market and falls through the 200 day the stock will probably reach $36. Meanwhile, presently the stock is oversold as can be seen on the oscillator. I rolled to Aug 39 today to take advantage of the premium so hopefully, if the stock climbs back up, I can buy it back and roll out to September once July options expire.

Jun 30 10 39.04 STO 10 Naked Puts Aug 39 @ 2.00
Comments: I rolled just to 39 to get a high premium. If the stock falls to 38, I will buy back the 39.00 and roll to 38 if there is enough premium.
5.1     19.50     1980.50 4928.25
JUL 16 10 40.07 Expiry: 10 NP JUL 35 expired                
Aug 20 10 41.90 STO 10 Naked Puts Sep 39 @ .31 0.79     19.50     290.50 5218.75
Aug 20 10 42.32 Expiry 10 Naked Puts Aug 39 expired                
Sep 2 10 43.20 STO 10 Naked Puts Oct 40 @ .65
Comments: With the news about burger king being sold, YUM should hold above 40.00 for a while. I will be closing my Sep 39 shortly for .05 cents. I have an order in to BTC at .05 and I am just waiting to be filled.
1.6     19.50     630.50 5849.25
Sep 17 2010: YUM remains in a strong uptrend, but the charts are showing some near term weakness would could signal that this uptrend is slowing or stopping for now. While I am not concerned about YUM pulling back, there is no indication of this from the charts. Therefore I closed my Oct 40 puts and moved to Jan to stay at the 40 level for a little while longer. Once the charts determine whether or not the uptrend is still intact, I will close these Jan 40 puts and move higher.

Sep 17 10 45.75 BTC 10 Naked Puts Oct 40 @ .18 (0.45)     19.50     (199.50) 5649.75
Sep 17 10 45.75 STO 10 Naked Puts Jan 40 @ 1.04 2.6     19.50     1020.50 6670.25
Sep 17 10 45.75 Expiry: 10 Naked Puts Aug 39 expired                
Nov 10 10 50.88 BTC 10 Naked Puts Jan 40 @ .14 (0.35)     19.50     (159.50) 6510.75
Nov 10 10 50.88 STO 10 Naked Puts Jan 45 @ .40 (0.80)     19.50     380.50 6891.25
Dec 23 10 49.66 BTC 10 Naked Puts Jan 45 @ .13 (0.29)     19.50     (110.50) 6780.75
Dec 23 10 49.66 STO 10 Naked Puts Feb 46 @ .60
COMMENTS: I prefer to stay somewhat out of the money on YUM as I do not want to get caught in any downturn. However by the time Jan expiry comes the Feb 46 puts could be worth just half a percent or less. I closed the Jan 45 puts early early as the Jan 45 sell of puts was also because of a roll up, so losing .13 cents to roll into Feb I felt was worthwhile.
1.3     19.50     580.50 7361.25

DEC 23 2010: Reviewing the chart for the past 6 months I can see there is strong support in the $40.00 range and second support around the $46.00 level from early in the fall. The recent pullback from the highs of late fall are to be somewhat expected as the stock is a little ahead of itself. Earnings though are strong and YUM! has given forward guidance that they are expecting strong earnings in 2011 and plan to continue opening more restaurants, particularly in Asia. Meanwhile I prefer to stay around the 46.00 strike until I see firm support at $50.00 and above. I closed now for a small cost in order to roll out to Feb at the 46.00 strike and capture the higher premium. If YUM! does not fall further, into January, the Feb 46 premium will be probably half of what is now being offered. Meanwhile my Jan 45 strike is a roll up so I have already had a great January, having "double dipped" in the month. Looking at the chart below gives a good idea of how I look at a chart. I can see the support from the summer and the support in the fall. This is a typical chart of a company in an uptrend. The stock moves up, then consolidates and then move higher. It will be interesting to see if the present pullback is a consolidation before continuing the uptrend or in fact marks a high point for the present.

 

                     
YUM TRADES BY YEARS
VIEW YUM-2011 TRADES
VIEW YUM-2010 TRADES
VIEW YUM-2009 TRADES

 

 

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright © 2008

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