Hi Eric, just wrapping up here at the office and noticed your post. Good day today for Orex longs. Hopefully, momentum guys will help us more tomorrow.
I agree with you. I definitely believe OREX will ultimately cruise back into double digits. Like you, the portfolio allocations that I make to this type of risk-level investment seldom involve dividends or are thought of as income generators. However, I measure my overall returns against a holding or opportunity cost rate of 15%apr (compounded monthly against $$ invested), and stripping call premiums has provided enhanced returns for me overall, but certainly not without associated risks. I often repurchase the calls (at significant percentage returns) before expiration when volatility provides the opportunity.
Even when in my judgement, an overbought condition warrants, I seldom go out (expiration date) more than a month or two and then only if the premium value that I receive for the call is significant IMO. More times than not over the years, such calls have expired out of the money and worthless, and of course in those cases I keep 100% of the extra dough. I will be much more wary about writing calls on OREX in Q2 and Q3 in anticipation of (hopefully) higher, accelerating rates of eps and associated stock price appreciation. Today, I think the market is mostly in a "wait and see" mode about OREX. Lots of disappointments ("paper" as well as realized losses) in last 12 months. Even though I am longterm investor in most issues that I buy, tend to average up with winners, seldom average down, usually blow away losers (15-20% mental stop loss)- and sometimes, but certainly selectively use covered call trading when it seems to make sense.
Can't remember but one stock being called away involuntarily. That was before I found out that the MM could exercise them AFTER market close on expiration day. If I'm not mistaken, they actually have the following Saturday (immediately after expiry)to snap up any in the money calls.
Been playing this covered call game successfully since the early 70s and have never had a call exercised prior to expiry. I'd be interested to hear if any reader of this thread has ever experienced calls being exercised prior to expiry. Experience has been that the investor long in calls simply sells them instead while time premium is high. On or near expiration, "near in the money" or essentially even money calls lose all premium value and if the subject stock upticks at the close or in after market trading, the MM understandably exploits the no-brainer opportunity. Like any other security, it doesn't always work as planned. Although infrequent, have certainly lost money trading covered calls, but usually more than offset by writing next, high premium, short-term call.
Please understand that I'm not suggesting that you (or anybody else who might read this -perhaps just to help cure their insomnia) write covered calls. Instead, every investor should only invest or trade commensurate with their education, experience, due diligence, and risk tolerance.
Sorry Eric, didn't mean to be so verbose. Good luck to you. I believe your "wish" will come true. If it does, email me and I'll buy the first round of beer (maybe Miles and other locals can join us for an OREX capital gain celebration party at Slocum's tavern, Peachtree Corners just around the corner from Isolyser). Oops, that sounded like too much euphoria - got to watch that sentiment level too!! |
