CRM (Salesforce.com) naked (short) put


CRM has fallen around 14% since it’s latest high at the end of Feb – earning were on 2/27.  Implied Volatility is high making premium selling attractive.  Price is also around the 618.8% fib retracement of the AB up move (around 56.5), with another support level around the 38.2% fib retracment of the larger CB up move (around 55).
SELL -5 CRM 100 MAY 14 50 PUT @.84 LMT ( (# of contracts to be tailored to match desired position size)
Return on capital of 16.8% over 55 days.
Note: Generally I wouldn’t hold the trade to expiration.  Would look to take profits earlier.
If CRM continues falling, options include …
(1) Purchasing CRM at 50 if the stock gets put (below 50 at expiration).  Cost basis would be 50-0.84 = 49.16
(2) Rolling the trade to the next expiration cycle if your view around CRM appreciating remains
(3) Closing the trade for a loss
crm
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This entry was posted in CRM, Fibonacci, Implied Volatility, Misc. Setups, Misc. Underlyings, Options, Short Put. Bookmark the permalink.

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