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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 174.18+1.1%3:59 PM EST
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To: Voltaire who wrote (46600)10/31/1999 11:33:00 AM
From: gdichaz  Read Replies (2) of 152472
 
Voltaire: I posted the following in Uncle Frank's G&K thread because he raised the question there whether he should "time" the Q's stock around earnings.

In my post I attempted to outline what I understood your call writing insurance policy to be. But I may not have been accurate. And you speak for yourself much better than I can reflect your views.

So is my characterization of your approach accurate?

Do you have any further comments on your call writing strategy?

Thanks in advance. Chaz (Cha2 on the G&K thread)

The post on G&K:

Talk : Market Trends : Gorilla and King Portfolio candidates

To: Uncle Frank (9273 )
From: gdichaz Sunday, Oct 31 1999 10:57AM ET
Reply # of 9287

Uncle Frank: As you know in response to your question on whether you should try to time the Q's short term price movements, my suggestion was - don't.

That was on the assumption that you were considering selling the stock and then trying to time buying it back.

For that my suggestion is still - don't - because the timing of the buyback is so difficult and the stock may have run away from you. And you would have substantial short term capital gains on which taxes must be paid at the ordinary income rate, while waiting permits the lower long term capital gain rate. In brief the game ain't worth the candle.

BUT in thinking about Voltaire's approach which he outlined on the Q thread, he is trying to avoid timing a sale of stock, he is talking about keeping all the Q stock and buying an insurance policy on it by writing (selling) in the money calls.

This is a horse of a different color.

Insurance not timing.

It is a sleep at night strategy.

A little complicated and needs careful execution on the writing and buying back of the calls themselves, but the stock is untouched.

Do I understand Voltaire's approach correctly - and if so - isn't it an even more conservative, i.e. modifying the Gorilla Game strategy by taking out insurance so to speak, (taking some license or interpretation of it) than simply holding the stock naked through earnings.

Comments welcome, particularly on:

First, is my reading of Voltaire's strategy correct?

Second, is this approach wise?

Third, is it consistent or inconsistent with GG principles?

Best as always.

Cha2
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