I followed a similar strategy at the start of the year, when I guessed that qcom would correct quite a bit. I sold common and bought leap calls on the way up, and bought near term puts close to the top. When the correction came my puts appreciated, I sold them close to the bottom and bought some more leap calls. However, I guessed right that the market was ripe for correction. Everything was in place: huge run-up at year end, people not wantint to sell due to taxes until the start of the year, and signs of a blowoff top.
Personally, I don't think the signs are there this time. It is too much of a gamble, so I am not going to do anything, just hold on to what I have and ride it down if another correction comes. It seems to me that this time there is no reason for a correction in Feb other than people are expecting one, so it probably will not happen. The interest rate hike is already in the market, at least 25 points and even more. The fed is not going to announce their bias, so that will not have any effect. Qcom is already down 20% for the year. And there is still a lot of money on the sidelines waiting for a correction that will jump in if it does not come, as well as short positions being built.
So I am a contrarian on this one, I say no significant correction until mid-March when people start raising money to pay taxes.
BWDIK |
