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October 19, 2011
Edited: October 19, 2011
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At 'Robbing the Markets Blind', it is not only a hope to give you precise high odds winning trading selections but JUST AS IMPORTANT our rational for making that trade.
While others on this site chatter in SILLY smak talk and slamming other members, our subscription service, "Robbing the Market Blind" will be all business with information and selected picks that can MAKE YOU MONEY!
Today let's look at Big Mac "McDonalds" ..MCD.
First, I'm disclosing that I own MCD stock. However, our trade today involves writing (cash-secured or naked) PUTs on MCD. When you write a put, you receive the current premium immediately. The entity buying the PUT from you has the option of putting the underlying stock to you to purchase at the assigned strike price. Hence, one always writes a put on a stock one doesn't mind owning if assigned.
Currently MCD is priced at 90.30 as this is being written.
By looking at the chart and the technicals I see that the $82.50 level has reasonable support as it rests. As well MCD Stock at $82.50 is below the 100 day moving average which McDonalds Stock has retested at least twice but perhaps three times in the last two months.
Also the 200 day moving average is just below the $82.50 strike. This means that should MCD Stock decisively break the 100 day moving average this could signal a change in trend, I will have the chance to buy back my $82.50 puts on McDonalds Stock and roll them lower. As long as I do not wait too long should the 100 day moving average break, then I will have time to roll down for a net credit on any roll.
Presently though, the strength in MCD Stock tells me that it is a good time to writing puts, albeit far out of the money and when possible, at the 200 day moving average. With the volatility high in the present market as investors fear debt issues, the US slowdown in the economy, high unemployment, housing sales, and a number of other worries, put premiums in MCD Stock are excellent and make writing puts highly profitable even when doing so far out of the money.
MCD stock has had excellent support at the 82.50 - 83 price level during the last few months of high volatility. With the current market strength this month, and the excellent results of MCD's earnings and dividend increases, one has high odds (excellent risk/reward ratio) of MCD not falling below 82.50 and if it did, one, as explained, can do an option roll-down.
Important is the RSI Indicator (Relative Strength Index) for McDonalds Stock. It remained fully positive on the big sell-off days.
Of interest was the MACD Indicator (moving average convergence divergence) when looking at the big sell-off days. The sell-offs produced just a mile negative amount and in each case MCD Stock quickly recovered as did the MACD Indicator. Important is the RSI Indicator (Relative Strength Index) for McDonalds Stock. It remained fully positive on the big sell-off days . The most important of the indicators was that MCD Stock failed to break the 100 day moving average.
So here's the trade.
WRITE MCD (cash-secured or naked) PUT on the DEC 82.50's for a premium of $91 per contract.
As of another option, if one wanted to take a more aggressive play with higher risk is to:
WRITE MCD (cash-secured or naked) PUT on the DEC 85's for a premium of $135.00 per contract.
Let me remind you when writing puts for income that stock selection is as critical as what strikes to select to sell. Writing puts for income is a strategy of small monthly gains
Final note: 'Robbing the Markets Blind' subscription info will be forthcoming. The information provided can come from our own analysis or those found on the internet that can provide a winning trade. We scan the internet for winners. Some of the information provided above came from our internet friends. Posts via DIVIMO on this site document the other trade pick selections. Currently our documented picks are 100% winners. Disclosure: I own MCD stock.
