Yum Stock is just wonderful for my portfolio. While many investors worry about the state of YUM Brand’s fast food empire I am just Put Selling my way to solid profits.
Yum stock has kept me in Put Selling heaven and I do believe more investors need to consider YUM stock. To be put selling Yum Stock consistently for profits, there are a few signals that I have set in my trading platform to be watching. When an investor becomes acquainted with them you can easily do Put Selling against YUM stock for substantial returns and limit the potential of being assigned unwanted shares.
The average 20 day volatility within YUM Stock has declined somewhat in the past several weeks back to 26% but that is still high enough to provide decent Put Selling returns especially when I sell those puts when YUM Stock is under selling pressure.
This morning is a perfect example. In the negative news about the restaurant sector this morning YUM Stock pulled back more than half a percent to $64.72. My alerts are set for half percent moves on YUM Stock, so I got my text alert notice on my smart phone when the stock was only down to $64.90. This meant I had plenty of time to set up the next Put Selling trade for YUM Stock. My chart was up in seconds and I could see the puts values climbing on the March 16 $62.50 put which is perfect as it is below the $63 support level. (More on support below). I jumped in and was back Put Selling as the stock continued to fall.
Put Selling Chart Tools For YUM Stock
In the chart below I have marked all the signals I keep an eye on that have assisted me when Put Selling YUM Stock. Let’s take a look to see how I use them to assist Put Selling.
A. I keep up the 10 day moving simple moving average (SMA) along with the 20 day and 30 day exponential moving averages (EMA) . I keep my YUM Chart set for 3 months. On Dec 6 2012 the 10 day moving average crossed down and over the 20 and 30 day EMA which signaled that YUM stock was moving lower which is exactly what it has done. I have never done Put Selling at the money for YUM Stock so the downturn in the stock has not seen any shares assigned. I have continued to do my Put Selling at lower strikes as the stock has moved lower.
B. Today the 10 day SMA is back up almost ready to cross up and over the 20 and 30 day EMA. This would signal that the downtrend is over in YUM Stock which would make Put Selling even easier if YUM Stock does recover. Somehow I doubt the stock is moving back to a buy simply because there are too many headwinds for this entire industry with every from minimum wage increases to food costs rising. I plan to keep Put Selling out of the money and below support levels even if the stock does become a buy by analysts.
B2. This move up by the 10 day SMA has happened lots of time in the past so I won’t be surprised to see the 10 day fail to cross as right now the fast food business in China is in disarray which is having an impact on YUM sales and keeping Yum Stock nice and volatile. This is exactly what I need to keep earning strong Put Selling premiums.
C. I keep an eye on the highs from each little rally waiting for when the next rally might finally break the lower high pattern. Right now though it is important to understand that YUM Stock is trading in a bearish pattern with lower highs and lower lows. It’s important to keep that in perspective with Put Selling.
D. The intraday low on December 21 was $63.07. I have that on my radar. So far the only break below that was on the earnings news back at point E wherein the stock fell to $59.68 and I bought 500 shares for $59.90. I have been Put Selling below that $63.00 level at the $62.50 and the $60 put strikes since the sell signal in early December. When Put Selling Yum Stock, I try to stay with smaller quantities of puts and shorter time frames at the $62.50 put strike such as today when I traded the March 16 naked put. Then I do Put Selling at the lower strike of $60 selling more naked put contracts at this lower strike.
E. The low so far was on February 5 when the earnings news really hurt the stock and it tumbled. I sold some puts, closed some puts and bought some shares. It is simple to do this kind of trade once you have all your parameters set. For example on Feb 5 the stock had already dropped big on the previous day, Feb 4. I knew that the stock could pull back further on Feb 5 so I was ready. Because I have the information in advance that the stock has been trading not lower than $63 to date, but is in a decline with lower highs, I know that if there is heavier selling such as on Feb 5, the chance that the stock will bounce back even to just $63 is very good since that has been resistance for quite some time. To understand support and resistance more, those readers who are FullyInformed Members can read this article from the series on How To Become A Better Investor. It looks at Put Selling safely against Hewlett-Packard Stock but the principals of support and resistance apply equally to this YUM Stock Put Selling trade.
Put Selling Trade For Feb 22 2013 Summary
By keeping specific stocks that have performed well with Put Selling strategies constantly on your radar you can quickly react when there is a dip in the stock, especially a dip with only a few weeks to options expiration. This makes for an ideal Put Selling trade with good returns for what is often only a few weeks of work. Keeping alerts set on your trading platform so they are sent to your smartphone by Text messaging is my preferred method as I find emails can be delayed and the best Put Selling trade for the moment is lost. Instead by having a text message rumble my smart phone when one of my stocks moves half a percent, I quickly see the message, jump into the Put Selling trade and then delete the message from my phone so that I don’t have messages to scroll through. With Put Selling I find timing is important to get the best premiums especially when it is just a dip I am Put Selling.
Yum stock has been fantastic since I started in 2009. It is a Put Selling dream and I believe more investors should put it on their smartphone alert radar.