Well, you have given me something to think about. The call spreads. I am a long time holder of INTCW. I have approx. 5000 shares. If I expect INTC to go beack to at least its high of the year by years' end, that means I expect 30 points of appreciation.
If you can buy a 120/140 spread for 10, then you are getting INTC for 130. Follow me? If I buy 50 of these spreads, then I have the same exposure as the stock with very limited downside but also very limited upside. If I buy 150 of these, then if INTC goes back to 160+, I make the same amount of money on the option spread as I would have had if I just held the stock. On the other hand, if INTC goes down to say, 120, by Jan next year, I would have only lost 10 points if i held the stock and 3X that amount by doing the call spread because i had to increase the number of options owned to give me the same upside target of 160 (I chose the target arbitrarily).
So, the question is, are the odds favoring INTC being at 130 or higher by Jan 98? 130 is breakeven on the strategy. Own the stock, own the calls, same difference. 140 and above, make 10 on the stock, make 30 on the calls. 150 make 20 on the stock, make 30 on the calls, 160, make 30 on the stock, make 30 on the calls. 120 on the stock, lose 10 on the stock, lose 30 on the calls. 110 on the stock, lose 20 on the stock, lose 30 on the calls, 100 on the stock, lose 30 on the stock, lose 30 on the calls.
NOw that I have rambled, I am going tos ign off and rethink this. |
