Robert:
Yes, selling covered calls would be the more conservative approach. But, my style is to take a few big bets, after studying it for a long time. I win, about 3 out of 4 times.
Anyway, the Nasdaq 100 is never "flat". There are very few electric utilities in it. A 20% decline only takes us back to where we were in March, and still leaves us at a PE above the historical range. You can't find any 6-month time periods when that index didn't make at least one 10% move, up or down. I will probably sell the puts for a 4-bagger, or let them expire worthless. If they become worthless, my other positions will have gone up a lot. So far, I've bought expiration dates of 6 months and 16 months away. I figure that gives me enough time, so I don't have to be right immediately.
Re: cisco: I bought it in 4/97 at a trailing PE of 35, vowed I would hold it forever, and sold it in 5/99 at a trailing PE of 103. I just couldn't stand the valuation. I think you have to pay attention to valuation, no matter how good the company is. It's up 20 points since then. Geez.
Yes, options really aren't worthwhile unless the underlying stock makes a large move. And I've learned that the bid-ask posted on the CBOE site has only a vague relationship to what the market maker is really willing to trade the option at. This month, I've bought zwqmf, qqqof, wkuai. Last March, I bought a couple hundred of zspah. In each case, I placed a limit order to buy at the bid, or split the difference between the bid and ask. Then I waited. In each case, I got a fill, eventually. Sometimes it took a few days. In several cases, the underlying stock had not moved at all. Waiting was the hardest part of the process.
I don't believe in magic. I believe in P/S ratios. |
