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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 148.32-3.3%Nov 14 9:30 AM EST
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To: Thomas J Pittman who wrote (7961)7/5/1999 12:23:00 AM
From: Jerome  Read Replies (2) of 10921
 
Another way to manage the risk of a highly profitable stock such as LRCX would be the following:
1) If you determined that LRCX has peaked at 50, using whatever method of evaluation you feel comfortable with, then consider the following.

2) Write a covered call at the 45 strike one month out. This should net you $700 to $800 dollars per hundred shares. $500.00 intrinsic value plus 2 or3 hundred dollars time value.

3)From that point on you do nothing until the stock hits 45.It may also go up but if you got $700.00 for the covered call then you have sold at the price of 52.

4) As the stock nears 45 you now have two choices depending on what the market implications are: a) do nothing and hope that the stock finishes between the 45 to 48 dollar range, or undo the covered call at a much lower price and sell the stock to close the deal.

Covered call writing is usually viewed as a means of generating income. But it can also be used to cover ones downside.

I also own LRCX and have picked 50 to 55 as an interim top. But then again it depends how fast it gets there and what the extraneous factors that drive this group are suggesting.

Good Luck,Jerome
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