First, when intc was at 160, you would not do a 120/140 spread, you would have a spread at much high price - but it is a stupid time to establish a call spread when stock traded at its all time high.
you miss the point - you dont buy call when stock is at its high, you buy call when stock is under pressure, and you believe the stock will recover. You should buy put or sell call when INTC was at 160!
You need to first know WHEN to long call and WHEN to long put to begin with. When INTC at 165, you should sell 160 LEAP call or better yet, buy 150 LEAP put and now you can reap the protection on your heavy INTCW holdings.
like I said, you dont have to establish the spread all at the same time - doing it at the same time is to LIMIT DOWNSIDE, but of course limit your upside - you could establish the long first as a stock hit short term support and HOLD (I dont even know where is intc's shortterm support lies now), then short call when stock retraces and hit resistance. buy the short call back when stock flow down to support, and sell call again when it flow back to resistance.
I have friends did it very sussfully on CSCO when CSCO had a trading range between 58-65 back then.
this practice requires closely monitoring market/stock and know your stock well so you won't be swayed by short term movements, i.e. before expiration, stock may move against your position, but by expiration, it is back to where you expect it to be.
Back to intc, you kept telling me you dont believe it would be back to 130. it closed at 130 1/8 friday. There was not much consolidation between 120 & 130 and intc has a gap at 118 and another gap at 90. It is scary. |
