Sell Qualcomm Cash Secured Puts And Get It For A Discounted Price?

QCOM has had a strong run up and its Price/Free Cash Flow ratio is looking a bit expensive. Is this a good time to sell QCOM puts for income while you wait for another dip?

By Donald E. L. Johnson

Cautious Speculator

• QCOM still is being recommended on CNBC as a final trade despite a rather expensive P/FCF ratio of about 28.

• The stock’s charts are bullish, which is good for selling puts.

• And it has good momentum. But we still don’t know whether this week’s rally is real.

Qualcomm (QCOM) yesterday popped $5.36 a share to $183.95. It’s 52-week high was $193.58 and its 52-week low was last October’s $122.165. Support is at its 50-day moving average of about $180 and its 120-DMA of $160. Resistance is its recent high. Analysts have a target price of about $196 while the academic fair value is an estimated $172, according to StockRover.com.

Given the uncertainties in the world and the markets, the best trade may be to sell QCOM 3.18.22 (36 days) $160 puts (delta -.13) for about $1.71. That would provide a margin of safety, or strike discount of 13%.

The annualized return on risk (RoR) would be about 9%, depending on the prices of the stock and options when the trades are done. Traders who want higher premiums and are more eager to buy the stock could sell the $170 puts (delta -.25) for about $3.48 and a 18% RoR.

Question: Will you hold or buy QCOM? Do you buy, sell or sell its puts and calls?

LINKs:

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Calls vs Puts Options: What’s the Difference?

Beware

Like all investing, trading stocks and options is risky. If you can’t sleep with market risks, you might want to let someone else do your trading. Consider an option trading ETF like XYLD, which I own. I also trade its calls and puts. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I reserve the right to trade any of the listed stocks and options at any time. I own don’t own or have options on the stocks mentioned in this article.

@realDonJohnson. I’m active on twitter where I tweet about trading and other things and link to tweets about stocks that I like.