taxman -
as opposed to say holding on to 100,000 shares of CPQ which I could have sold in the high 40's? <G>
but seriously, my maximum exposure is about $360K, and I get 10,000 shares of DELL for that into the bargain. Assuming that DELL is under 40 in January and the shares get put to me. Assuming that they are in fact under 36 and it's a bad deal. Also assuming I don't roll the position before then...
I am still feeling my way through options trading so I value any opinions or advice about my trades. But this one did not seem like a risky play. If there is something I am overlooking I would sure like to know about it.
I can see a lot of reasons why DELL might remain in the 40's through January, but I don't see much likelihood it will go below 40. Nothing wrong with the business, continued good execution across the board, with the possible exception of service issues which are certainly not serious enough to tank the stock. It could be in the 50's by then, assuming a good 4Q.
I think, after a year of "catching up", that DELL has pretty much grown into its price, and will start to move up with earnings growth in 2000. I'm not astute enough to say exactly when that will be, and we might see the same kind of range movement for a while. I have been selling covered calls all year, and was looking to get into a straddle or into selling puts somewhere along the way, anticipating an upward move. This bargain just gave me enough of a reason to do it now. I am already up almost a point and could roll these tomorrow and come out with $10K... |
