We temporarily exited our Devon Energy (DVN) position by selling our shares to avoid the company’s earnings announcement. The stock sold off 17% last week after the fracker reported disappointing fourth-quarter results and has continued to drift.
Devon’s adjusted fourth-quarter earnings of $1.66 per share declined from a year ago and missed the consensus analyst estimate of $1.75 per share. However, operating cash flow was up 18% year over year to $1.9 billion in Q4 on record oil output. And the company’s operating margin stood at 41% compared with 21% at the end of 2021.
With shares stabilizing, I am recommending we sell a put to generate income and reduce our net debit on the position.
Our Marvell Technology (MRVL) shares were called away last week. I am recommending we sell a put to generate income and reduce our large net debit.
The stock sold off in the tech sector on Friday but remains up for the year. While we are deep underwater in the position, I see the stock as extremely undervalued and expect a new three-to-five-year chip construction cycle to begin by year-end.
You can enter today’s trades even if you were not in the previous ones. Just be aware that we will be managing and tracking them based on the ongoing positions.
Also note that Marvell is scheduled to report earnings on March 2. We will close the put we sell today before earnings and re-enter the position after the announcement.
DVN
Current Stock Price: $54.28
Net Debit: $0.48
Action: Sell to open the DVN Mar Week One (3/3) 53 Put
Current Option Price: $0.65-$0.74
Recommended Limit: Set your initial limit order to $0.69, but adjust as needed to sell a put today
Expiration: After the close on Friday, March 3
Cash in Hand: $0.21
Potential Rate of Return: 0.4% in 36 days, or 4% annualized, if this option expires worthless
MRVL
Current Stock Price: $44.50
Net Debit: $17.20
Action: Sell to open the MRVL Mar Week One (3/3) 43 Put for around $1.24 but adjust as needed to sell a put today.
Current Option Price: $1.20-$1.28
Recommended Limit: Set your initial limit order to $1.24, but adjust as needed to sell a put today
Expiration: After the close on Friday, March 3
New Net Debit: $15.96
Potential Rate of Return: I am targeting breakeven for this position