Put Selling on EMC Stock Needs A Strategy – Investor Question

Put Selling is definitely a passion of mine. Every day I get emails from other investors keen on Put Selling as a principal investment and often they mention stocks that I do not follow. The question today is on Put Selling EMC Stock. EMC Corporation (EMC) and its subsidiaries develops, delivers and supports the information technology through two different categories, EMC Information Infrastructure and VMware Virtual Infrastructure.

Put Selling EMC Stock

Part of the reason I am writing this article is because EMC Stock actually looks intriguing for Put Selling possibilities. EMC stock book value is $10.61 and cash flow is $2.00 a share. PE is still high at 18.8 X and price to cash flow is also high at 11.1 X. Gross margin is 62.81% which is almost 1 and a half times the industry average but profit margin is just 13.29% below industry average. Return on equity is 13.12% again low and return on assets is just 7.96%. There is no dividend and debt to capital is a respectable 6.78%. Revenue is 21.7 billion so this company certainly has potential but continues to lag its peers.

EMC Stock Chart For Put Selling

The last 12 months of EMC Stock are below (daily chart). We had weakness last summer when twice the stock attempted to break support. From there the stock climbed back but failed to recover the previous highs. Now it is back selling lower again.

Put Selling chart on EMC Stock

Put Selling chart on EMC Stock

The volatility is high enough in EMC Stock to make Put Selling decent. The question is what strikes to pick. Below are the April 20 put strikes for EMC Stock and you can see that $23 has a very nice premium. $22 is also quite good and in fact an investor could probably put in an offer at .40 cents and wait to see if they get a fill over the next couple of days..

Put Selling Strike April

Put Selling valuations For April 20 expiry

Put Selling Wait and See Approach

Looking at the past 6 months you can see the problem. EMC Stock is in a decline. The lower highs is definitely in control and lower lows are being exhibited. This does not mean the stock cannot be used for Put Selling, but it does mean that when puts are sold you need to watch and close them when there is a good profit. Normally I like to see 75% of the put premium earned captured before I consider closing early but sometimes a stock fools you and drops right through support.

EMC Stock 6 month daily

EMC Stock 6 month daily

This then becomes sort of a wait and see approach to Put Selling. You look for down days and then pick those days to try to low-ball your way into a put strike. It’s an approach similar to dip selling. Sometimes it works and sometimes it doesn’t, but when it works it can give you that extra .10 or .15 cents in a put which provides a better chance to close early for an improved return.

Put Selling 15 minute chart

For example, EMC Stock 15 minute chart for the past 5 days is below. I normally bring up the 15 minute chart and then look for dips in the stock. For example point A  on last Tuesday saw the stock dip to $22.78 and EMC Stock April $20 put options jumped. I then check to see what they jumped to and put in an offer to sell the same puts at the same or a very close price. Point B saw the stock dip to $22.80 so I would have probably got a fill on Wednesday morning right at the open.

If not then point C on Friday again saw the stock dip to $22.75 and $22.79, both of which should have produced a fill on the $22 puts at a very nice premium of around .45 cents or better than 2%.

Put Selling EMC Stock 5 day 15 minute

Put Selling EMC Stock 5 day 15 minute

Once you get the fill watch the stock for a move along the Bollinger Bands. If it clings to the Lower Bollinger Band as a point D then you know the stock could pull back further, but as long as it is trending sideways away from the Lower Bollinger Band then you are in fine shape. If EMC Stock trends higher and pushes to the Upper Bollinger Band look for opportunities to close early. 75% of .45 cents means I would like to close for .12 cents or less. Often when the stock pushes back up I can get that within a few weeks of expiry. That would mean look to close by the end of March or first week of April.

Put Selling EMC Stock Summary

When Put Selling it is not difficult to get the best possible put premiums by simply using a little bit of strategy. Remember that the market maker is adjusting the option prices continually. Often you can set an alert either email or text that warns you when the stock has reached a certain point. Text messaging is best since it is a close to instant as you can get. This gives you a “heads up” that the stock has moved lower towards your price point and you can quickly check the put option premiums and aim for the best price of the day. Often I get emails asking me how I get the prices I do. Well now you know. It’s not difficult and an alert is sometimes all you need to know when your stock is primed for the best Put Selling prices you can get.

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