Poet,
Writing 260 strike PUTS on a stock with the technicals that JDSU is currently showing is a very interesting strategy indeed. Not one for the faint of heart, and frankly, I think he'd like to own stock a little lower than his current PUT price of 260.
If the stock goes down to 200 by the exercise date or lower and stays there, he's out 6K PER CONTRACT (without his premium counted in). If he sold 10 contracts, that's out of pocket 60K.
I hope he's an option master, but he hasn't talked about his protection (maybe he's short... or has purchased puts...).
And without some downside protection (like long puts somewhere in the pipeline.....) he's only counting on the mo-mo to hold up the price here.
I, too, like writing options for the premium much more than buying options, but I personally think he didn't expect this severe a correction today, and probably wished he'd waited to write them.
There was and continues to be HUGE risk in naked PUT writing on stocks like JDSU when they turn. You saw some teeth today.
As well, I hope it's over, but it may not be.
Steve |
