Dan,
The main reason for going for the Oct. 7.5's is I'm anticipating a possible dump on this stock, but I don't want to risk selling out too many months, and locking myself in. I've seen this stock retreat to 7 and below in a heart beat. You're right about gaining only a 1/4 point by selling the calls and losing out if the stock creeps over 9, but I think it's hit overhead resistance (Herm thinks it's at 10).
Now, I could just sell the stock, and then wait for it to come back down to a level where I could buy it again. If I'm playing WIN's right, though, I'm anticipating that the stock will come down in October, and I may not even be called out. The beauty of WIN's is that you don't have to pay attention to the stock market. I'm willing to give up profit, if I get back time in return. By selling ITM calls one to three or more months out, I don't have to monitor the stock everyday. I can just look at performance twice a week (just to cover myself if I want to do some sideshow action). BTW, My record for not being called out on an ITM call is 3/8 of a point. (My record for being called out on an OTM call is 2 points! - I have no idea what happened in that transaction, but I was happy to reap the profits).
I hope that explains my strategy (courtesy of much help from Herm and this forum). I'm conservative, but I've been making 50-100% annual return on my investments, so no complaints here.
Mike
P.S. to Nate: The only reason I didn't sell the Jan 5's (or even the Nov. 5's) is that I don't think the stock's going to retreat that low, meaning I will definitely lock my profits in at whatever the calls are going for. In this case, as of Friday's prices, I think each of these calls were going for around 3-3/4, locking my profit in at 1-3/4 per share. With the 7.5's, my profit is guaranteed at 2 per share (if called out), and 1-1/2 if not.
P.S. to Herm: I don't know about going farther out than October. I admitedly use my gut (along with WINS) in the stock market, and I'm definitely using it here. If the Nov. 7.5's had offered more return, I would have jumped on them. |
