While Stanley Black & Decker’s third-quarter earnings rose 44% they lowered their guidance for the year and watched shares in Stanley Black & Decker stock plunge over 14%. So for Put Selling investors is the drop in Stanley Black & Decker Stock (SWK) an opportunity? You bet. Stanley Black & Decker Stock (SWK) represents one of the largest companies in the industrial machinery and equipment sector. With earnings of $3.04 per share to date, a book value of $41.68 and a cash flow of $6.03 a share Stanley Black & Decker Stock (SWK) is well worth a look for investors interested in taking advantage of today’s plunge. There are plenty of Put Selling opportunities ahead.
Stanley Black & Decker Stock (SWK) Annual Dividend
The annual dividend at present stands at $2.00 for a return of 2.59 percent. This is slightly above the average for this sector. Debt to capital is respectable at 41%. Stanley Black & Decker Stock (SWK) has seen its dividend almost double in the last 3 years. With revenue of $10.6 billion Stanley Black & Decker Stock (SWK) is worth considering for Put Selling and with today’s plunge the volatility has spiked, driving up put option premiums.
For investors like myself who love Put Selling, the key is to sell at or just below support to try to avoid assignment of shares. Let’s take a look.
Stanley Black & Decker Stock (SWK) Put Selling Against Support
Stanley Black & Decker Stock (SWK) has been in a serious uptrend all year. Before discussing what today’s action means, let’s look at the support levels in the stock. Based on volume and price support is primarily concentrated at the $75 valuation. There is minimal if any support at $85 and possibly a little support around the $78 but the majority of support is at $75. You can see in the chart below that today’s volume is more than three times the average volume and marks the highest volume in over a year. Today is also witnessing the highest volume since 2012. A lot of investors obviously believe the run-up in the stock is over and they are selling out to lock in their gains which for many investors will be quite good.
Stanley Black & Decker Stock (SWK) Breaking Its Uptrend
Investors selling today may indeed be correct. If you look at the chart below you can see that today’s collapse in valuation is breaking the pattern of higher lows which is indicative of a stock rising in a solid uptrend. While Stanley Black & Decker Stock (SWK) may bounce back, this collapse will break the uptrend and will mean the stock can climb again but it will continue to face stiffer resistance, selling pressure, short-sellers and traders all of which will mean each rally back will continue to retest lows. This also means substantial profits for Put Selling investors such as myself.
Put Selling Against Support in Stanley Black & Decker Stock (SWK)
You can see from the below chart that today’s collapse plunged Stanley Black & Decker Stock (SWK) right back to where primary support for the past year has been, namely $75. For Put Selling then, the $75 and $72.50 puts make sense. For the more aggressive trade the $75.00 is the put strike to be Put Selling. For the more conservative investor, the $72.50 put strike makes the grade.
Put Selling Trading With Stanley Black & Decker Stock (SWK)
In this morning’s plunge I sold 10 of the Oct 19 $75 put strike for .73 cents. What a terrific trade, but this put strike must be traded and not held. Each time Stanley Black & Decker Stock (SWK) rallies, the puts should be bought back to close the trade. If the $75 valuation is continually retested, which I am not expecting to be the case, then the $75 will eventually break. Personally I think $75 will hold for some time and the stock will recover to possibly $80.00 or $82.50, but the opportunities with each dip will be excellent for more Put Selling.
Remember, keep an eye on SWK Stock. I will be considering Put Selling Stanley Black & Decker Stock (SWK) at the $75 and $72.50 levels until I see definite signs that the $75 may break. When it does the stock will quickly fall to the $70 level where there is longer-term support.
Use Of January 2014 Put Options For Put Selling
The Stanley Black & Decker Stock (SWK) January $75 put options are an excellent play. The $75 was trading for $3.70 and the $72.50 for $2.75. In my strategy I have no plans to hold them for any period of time but I will be trading them continually whenever the stock rallies. Each rally I will be buying back the January 2014 put strikes I have sold and in each dip back I will be in there selling.
I will be staying 3 months out for these put strikes. That means as we enter December I will be moving to February or March, whichever month is available. Stanley Black & Decker Stock (SWK) can gyrate as much as it wants but with the longer-term uptrend now broken there are bound to be lots of trade opportunities ahead.