And I am talking long in both senses of the word. Back in August I saw interesting price action in Exxon Mobil (XOM), and discussed it in Exxon Mobil Set to Become a $500 Billion Company. The breakout did come on September 6th (I missed it – probably getting lunch or something) and it settled a few days later. Without any stock I took to planning an entry. This would happen at either a breakout of the consolidation or a retest and hold lower. I was presented with the latter as it started falling in mid-October.
A potential bottom hit on November 15th (#1 on the chart below). It was noted by the doji candle that touched the 200 day Simple Moving Average. I chose to employ an options strategy for an entry. The strategy I used is known as selling a naked put or a cash secured put. In this strategy you sell a put naked at a strike price where, combined with the premium you receive from selling that put, you are comfortable owning the stock.
Expecting a move back higher I sold to open December 87.50 Puts for $2.71. A close below 87.50 on December 22 expiry would end up with me owning the stock with a basis of 84.79 (87.50 less the 2.41 premium), below the level at the time. Of course that would not be such a good level if the stock continued lower to 80. Time went by and then into the December Expiry week I was presented with an option.
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