Gary,
As I told jmac, I make it a practice of not responding to those that do not fill out SI profile forms. It is nice to read these so that we can all know who we are talking to. However, trusting that you will fill out the SI profile form, I will respond to your questions.
Yes, you are correct, and you raise some good questions. When I rolled up to the Jan. 135 Calls on Thursday I had more than used up the 19 points of the original premium that I had received for the Jan 95s. That is why I wrote in my post "but that is another story". If you recall, Thursday morning INTC was in the low 140s and everyone, including myself, was feeling more confident about Intel's future price going up. As INTC backed off a little I decided to roll up. This was unfortunate as I rolled up too far into the money to give me downside protection. However, I did not know then that Friday INTC would go down 4 1/2 points. Much to my chagrin I do make mistakes.(g)
But to answer your questions as to when I decide to cover, rollup, or let the stock be called away. There are no fixed rules that I can give you. It is a matter of each individuals personal circumstances. It depends on what you expect the underlying stock to do, your level of confidence, how much risk you want to hedge, tax considerations, and most of all- your overall portfollio strategic needs.
In my decision to roll-up to the Jan. 135s, all of these considerations where taken into account. However, in fairness to myself, and which I did not mention in my post yesterday, as we were only talking about 1 contract, on some contracts I did roll up only to the Jan. 130s. Given today's price of INTC, this strike price was also too close to the current price, but at least was a little better than the 135s. But essentially you are correct, at this point it no longer gives me protection on the down side. And yes I will not be a happy camper if Intel goes back down to 108. However, I think a lot of us on this thread will not be happy campers if that should occur. Remember though that originally my choice was to sell at 108. Given the rollup strategy that I used, I will still be ahead for having not sold my stock back in October, as long as INTC stays above 113 before Jan 97.
But Gary, and this is where the long term investor's strategy differs from the day trader's, I think of this strategy as having bought insurance. Sometimes the policy term runs out without a need to make a claim. Since I own more Intel shares than I wrote Calls on, I am very happy that so far I did not need the insurance.
Jules |
