Jeff; I got a friend who is a broker and he has convinced me that
stop losses are for suckers. If you put a limit it can run right
by you , if you don't you most often get what it stops at.
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If your worried about a stock, buy it and short it against the book,
and sell puts..if it gets put to you you keep the prem. and
it closes the short..and you make the down side. Play safe
buy calls with the put money you got, at least
your hedged, if it goes up buy the cheaper puts back and roll up
selling more expensive ones.. You own the stock, and you don't..
as your always short on what you own. Try to play only stocks that
have options and look to see if the time premium on the puts
is slightly more than the calls. You are also buying and selling
"time" the more you buy at a clip ( more out in time ) the
cheaper the rate is per month..sell it in short chunks.
First month or so it don't look like your coming out, as the
longer calls cost more but you sell puts month after month.
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In the case were the stock falls you lose value on the calls, if they are out some they wont lose value as fast in respect to the stock, the
closer in the more they track the price, so if it goes down
and your short closes you roll your calls down or just get out
of them what you can, and if you crunched the numbers and had
a good plan you make more or at least as much on the down side
of the stock than you lose on the calls, if it climbs
you keep the put money or roll it up..and your calls become more
valuable, to offset what you lose by holding it short, the key
is to make money off selling puts.
In some cases If I want a stock, but want it cheaper..I sell puts
and don't buy it, if she drops and gets put to me I also have
the put premium to help pay for the stock, if you sell in the
money puts she don't even have to drop..as at ex date if you dont buy them back, she gets put to you, but the prem is yours
to help pay for the stock. In short you go long on the stock
when you sell puts, ( you have to have the dough in your account
to pick her up if need be..but that dough is making interest
at MM rates. Soon as you get her short and sell put, and buy call.
If the options are right you can buy call, short aginst the call,
and sell puts..and never have to own the stock.
But shorting what you already own you don't have the broker
telling you he can't find stock to lend you..as you lend it to yourself. Set your targets don't just fire off shots in the
wilderness, ( crunch numbers till your blue in the face )
and hunt for options that play in your favor, which ever way
you want to go. The only stocks I play without options are penny
stocks. or baskets like SPY, MDY, DIA..options with them are not
worth fooling with and seem to cost to much to me.
Jim |
