Today I implemented our put selling strategy for the first time. I wrote one contract on Citigroup (C), a nationally well known financial service holding company. As you can see on the annotated chart, Citigroup had responded positively to a recent earnings announcement, and then traded sideways for a time. This is denoted below by a solid horizontal white line. The RSI during this period was hovering near overbought levels.

More recently, the stock price has taken a sharp decline. The RSI rather quickly changed from near overbought to near oversold levels (both indicated by dotted white lines.) Resistance (blue horizontal line) is in the low $60s, so I sold to open (STO) one contract at the $62.50 strike price. This price is well below the red 200-day moving average.

If we do get assigned, we will pick up these shares at a price that hasn’t been available since October/November of last year. Otherwise, we immediately earned nearly $145 in option premium income by making this trade.

The analysts at Sure Dividend, in their most recent analysis in January, listed the “fair value” of this company at $87/share. Picking this company up for $61.05 a share if assigned would be equivalent to buying shares for 70 cents on the dollar.

The delta on this trade was just over .20, roughly the equivalent to the market assuming we have a 20% chance of being assigned. The annualized ROI if we are not assigned is just over 10.5%.