Ben , You just described my strategy with CREAF for the first few months of 1998- I do not know if it will work, but I'm trying it. I hold CREAF long- term, and currently buy and sell the call options. Sell the options on the up days, and try to buy them back and close them after two/three down days in a row. Again and again.
The whole basis of my strategy is that CREAF will sit in a $16.50-$20/share price channel up to at least the April earnings release. After that when it becomes clear if CREAF's future strategy will work, then CREAF will break out of this channel- my guess is on the upside,as I have faith in Sim Wong Hoo and his strategy....
And if CREAF nosedives instead, well you'll have collected the premiums and reduced your exposure... This scenario I doubt as I track about 40 tech stocks technically; and generally the whole sector's technical tone appears to be consistently improving. CREAF itself is still in a bearish chart pattern- that's why a reasonable guess for the time being is that CREAF will trade in the noted price channel even though its Up/Down Trading ratio turned positive two weeks ago, and is rising in value, in the last two days from 0.7 to 0.8.....(Means that the stock is being slightly to moderately accumulated)...
Also I repeat again something here which is counter to the pundits stated wisdom. It is good, not bad currently that CREAF is an Asian-based company. Why? two reasons IMO- first Asian markets are about through with their tremendous corrections; two and this seems to be overlooked- currency fluctuations on Asian currencies.
My guess is that the various Asian currencies will apreciate versus the dollar as Asia recovers. For e.g., the Won fell to 30% of its previous value against the dolllar. As the Korean economy recovers is it not safe to assume that the Won will recover at least part of that value vis-vis the dollar? Indeed if the Korean stock market is flat in 1998 but the Won recovers 20% of its value, then you'll still make 20% on a US Dollar denominated investment in Korean stocks....
So let's talk currencies- I defer to our Asian-based Brothers and Sisters on the Thread. How much has the Singapore Dollar depreciated versus the US Dollar since say last summer? In your opinion will the Singapore Dollar rise against the US Dollar in the next 12 months? This could be an extra "kicker" in return on CREAF when the Asian economies start to turn around....Which is I'm guessing it will be reflected in stock prices starting tin the Summer.
At that point, I will quit writing call options....
Sincerely,
Doug F. |
