An approved and improved dividend hike and solid technical footing puts Garmin (GRMN) on the radar for bullish investors. And to position more safely for an intermediate-term move, using a Garmin stock married put can help bulls get through those short-term bumps in the road.
Monday was an ugly session for the buy-and-hope camp insistent market corrections are a thing of the past. But while that sort of market proclivity may in fact be just getting started; Garmin stock looks locked in to march higher technically with improved fundamental support.
Garmin Stock Dividend Hike
Effective for Garmin stock’s June 30 dividend date, Garmin announced it will increase its payout on shares by 6.3% for an effective 4.2% yearly payout and quarterly dividend of 51 cents.
The report, which was released on Friday appears to have found some investor support Monday as Garmin stock back-stepped by a very modest 15 cents or 0.33% versus the NASDAQ 100 and its 1% loss.
Garmin Stock Weekly Chart
With fresh fundamental support in place, Garmin stock has also put in a decent-size technical correction over the past year with which to entice bullish investors. Looking above at the provided weekly Garmin stock chart, shares have pulled back roughly 25% since last summer’s highs just north of $60 a share.
Also nice to see, the Garmin stock correction has some pattern symmetry with two distinct down legs. The symmetry in GRMN is directed at the very similar dollar-size price corrections from last July to October and then February to June this year.
Corrective moves of this kind are often called mirror moves. Additionally and in between the two corrections, there appears to be an ABC configuration, which many traders reliant upon Fibonacci numbers and patterns follow.
Lastly, we’re bullish on the current low holding due to a confluence of three Fibonacci support levels just below Garmin stock and dating back as far as the financial crisis lows of 2009. In the mix as well is the 200-week simple moving average and supportive bullish divergence in the stochastics indicator.
Garmin Stock Married Put Strategy
Checking Garmin stock’s options board, one strategy which looks attractive is the Jul $42.50 married put for about $46 a spread. The debit reflects the cost of GRMN shares and the put price of 50 cents added together.
The married put allows a bullish trader to receive the new and beefier dividend payout in Garmin stock. Additionally, the long put in conjunction with shares of GRMN manages position risk to a guaranteed dollar amount as the purchased strike acts as a floor for losses.
To come up with the effective stop loss for this Garmin stock married put strategy, simply calculate the difference of the debit paid from the strike — in this case, $3.50, maximum risk or roughly 7.7% of the Garmin stock price.
On the profit side, if shares of Garmin stock begin to climb higher, the put premium of 50 cents would reduce gains by that amount when compared to straight stock ownership, if the put were allowed to simply expire worthless. However, rolling the contract and even adding a short call are ways to build upon and potentially improve the trader’s risk and reward over time.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon his observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.