In The Money Puts Selling With Momma Requires Safety First

As FullyInformed Members know, I am using the Put Selling Strategy “Walk That Profit Home To Momma” on Clorox Stock and Johnson and Johnson Stock. Both are proceeding exceptionally well but at this point with Johnson and Johnson stock now above $75.00 a review should be done to determine the safety factor of selling the next set of in the money puts, namely the April $77.50 put strike.

Steps to Ensure Success with In The Money Puts

Walk That Profit Home To Momma Put Selling strategy works well on rising stocks but only if I periodically review the rise in the stock to make sure it is still intact before selling the next set of in the money puts. Guarding against downturn surprises in a stock takes only a few moments and helps to ensure a profitable trade. While there are never guarantees with risky assets there a number of signs and signals to watch for that can warn when selling the next round of in the money puts may be a mistake.

Johnson and Johnson Stock January – February 2013

Since January 2 2013, Johnson and Johnson Stock has moved considerably higher, up now 6.5% as of this Friday. The Johnson and Johnson Stock daily chart below since Jan 2 2013 shows the latest rally higher.

Selling In The Money Puts on Johnson and Johnson Stock Jan - Feb 2013 daily chart

Selling in the money puts has returned 6.2% versus a 6.5% rise in Johnson and Johnson Stock.

Selling In The Money Puts Momma’s Way

Using standard Put Selling would not earn 6.5% over this period. Even trading naked puts throughout the rise would not have returned 6.5%. Indeed the best return would have come from buying call options on January 2 and still be holding them today. That would have been a great call by an investor but rare.

This is where the Walk That Profit Home To Momma Strategy comes into play. This strategy is well explained and outlined in this article so I won’t go into it in detail, but suffice to say it is a strategy of selling in the money puts on stocks I would own if assigned as they rise.

The Momma Put Selling strategy allows me to enjoy most of the profits from the rise in the stock thanks to selling in the money puts. For example the Momma strategy has allowed me to earn 6.2% so far in 2013 almost equalling the 6.5% rise in the stock. You can view 2013 trades through this link. You can see in the JNJ stock trades for 2013 that on Friday I have already bought to close my $72.50 naked puts for February since the stock has now moved past $72.50. I am still holding the April $72.50 naked puts which also are no longer in the money and my April $75.00 naked puts that have recently moved out of the money. The key now will be deciding the next step in the Momma Put Selling strategy and to help there are some easy steps I can take to help ensure safety and profitability in my Johnson and Johnson Stock trade.

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