Hello Jeffrey,
I think the beauty of buy/write is that all your outcomes are predictable -- you may not know which one will occur but if you are OK with the several possibilities it's simple and conservative. I like to Keep It Simple Stupid though.
Say, I buy/write NTAP at 20. Most of you would sell the 25's, but I'd probably go for the 20's, two months out, say $3premium (off the top of my head). The next week, the thing runs to 25 and still holds 1.6 premium. Do I hold, unravel it all, or buy more stock at the top to keep from killing myself (g)
I say, do the buy/write, bank the $3 premium and forget about it until the expiration. If you get called or it stays the same, you make about 15% on your money. Break even down at $17 -- below that, well that's life. :o) No muss, no fuss, no grief.
At expiration, evaluate your status and probably just do it again with the stock you have retained or with a new block purchased with the previous proceeds. Or, if things are really turning sour...time to sit on your hands awhile ( or play the put game ?).
--dfl |
