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Follow up, covered calls. It has been my observation over the years, that when a stock gets hit, call prices stay quite high the first few trading hours. Speculators [call buyers] are still filled with hope and high expectations. If the price of the underlying security stays in place, IE doesn't substantially rebound, then call prices collapse or at least decline as hope gives way to reality. Of course it would be good to have the foresight to sell calls before a break, but sometimes one can not do that for a variety of reasons including unexpected news. If one decides after the break to hedge, it is often beneficial to get in within the first hour or two to take advantage of maximum premium. Already today tlab calls are losing premium vs. 2 1/2 hours ago when the previous post was made even though TLAB is exactly where it was at that time, 65 3/8. I believe it is counterproductive to use limits generally with stocks [for reasons I will go into if requested], but with the wide spreads and lack of liquidity in equity options, it is a good idea. If done early enough, one can often put in a limit close to the ask and often get filled. The entrance of so many new players to the option arena is a good thing as many will make mistakes that can be capitalized on, plus it increases liquidity. One final thought. Often when a stock is hit on truly bad news [not saying TLAB or SFE fit this case], often the market is inefficient and the stock should actually be lower and usually will in subsequent days. Conversely, if a stock has a gap up on unexpectedly good news like great earnings, the market is similarily inefficient and the stock should be up even more and usually will be in subsequent days and weeks. One of several reasons why is that it time it takes for institutions to analyze and move in or out. Just checked TLAB, down to $63 and change on almost 9M. sh. Technically not good. Mike |
