Put selling is definitely not an exact science. If it was everyone would be put selling stocks for a living. Yesterday I sold just a handful of Microsoft stock naked puts for July and August and prepared to sell puts for better premiums at lower strikes. I expected Microsoft stock to fall after the announcement of their tablet product. I commented how investors tend to buy the news but sell the unveiling. Well that was yesterday and today is today. Obviously investors are excited about Microsoft stock and the opportunities their tablet called Surface, will bring.
Personally I was not overly impressed as the tablet Surface is a bit large and with the fold out keyboard is I think more a tablet PC than a true tablet contender. It reminded me more of a netbook. But once I get my hands on one perhaps I will change my mind.
Microsoft Stock Up 3.8% Ending Put Selling For Now
Microsoft stock at the point of writing this article is up 3.8% to $31.00 on fair volume. I am writing this as of 12:00 PM so there is still lots of time left in the day.
Obviously this ends my put selling strategy for the time being. This is not what I had expected although to be fair I might have been too quick to judge the indicators last night as telling me the stock was going to pull back. Only the fast stochastic was turning down with an extreme oversold reading. Despite what I read into the Fast Stochastic, all the technical timing indicators were still pointing up. My Microsoft Stock article from yesterday can be read here. It would appear that I jumped the gun so to speak.
Put Selling Stocks I Would Own
But then that is the beauty of put selling stocks I would own. While yesterday my outlook was for Microsoft stock to fall lower, I was still selling small quantities of naked puts because even if I was right and the stock did fall, I would be selling more naked puts and lower levels which would average me lower into the stock. But I am also able to sell naked puts at higher strikes to take advantage of yesterday’s weakness. It’s not a strategy for investors who do not want to own shares. They should always weight for clearer signs that a downtrend has ended before doing more put selling.
Microsoft Stock Technical Timing Indicators
The technical indicators for this morning show Microsoft stock is heavily overbought. The technical indicators of fast stochastic and slow stochastic continue to show the stock as extremely overbought and this morning the fast stochastic is still show a very strong chance the stock will pull back. Whether it can fall back to $28.00 will have to be determined at a later date.
Microsoft Stock Short-Term Outlook
I am still expecting Microsoft Stock to pull back. With such a strong overbought reading it is rare when a stock doesn’t pull back. Meanwhile I will have to comfort myself with the handful of naked puts I sold yesterday. My Microsoft stock put selling strategy was for the stock to fall back toward support and I would increase the number of puts sold as the stock fell lower. I was expecting the stock to easily reach $28.00 over the next few weeks. That may now not happen and I will have to re-evaluate my put selling strikes in a few weeks after the stock has settled down from the tablet news event and investors take into account what Microsoft is up against in the now emerging tablet wars.