SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Gorilla Game Investing in the eWorld
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Teflon who wrote (898)12/12/1999 7:15:00 AM
From: pekos   of 1817
 
Options and my evil twin

After reading the manual, I try to migrate from a short term trader to a long term buy and hold investor.

With the runup of QCOM to over $400 in November, I nearly failed and wanted to sell.
Everything in me has been crying "Windfall profit, take it!", but I hold the shares.

But the trader in me would like to have some shortterm action, so I decided to do some option trades with "Risk Money".

I will buy on monday a QCOM Jul 2000 280 Call @ 148.75 with 223 days to expiration, Delta Delta 0.85
I will sell on monday a QCOM Jan 2000 430 Call @ 24.5 with 41 days to expiration, Delta 0.36

Profit calculation:
called out
150 = 430 - 280 strike difference
+24.5 Option premium received
-148.75 Option premium paid
-----------
25.75 profit in 41 days
=====
25.75 * 100 - 2xCommission (usd 29 for me)

usd 12483 Money at Risk
usd 2517 Profit
= 20.16% in 41 days or 177.07% annualized

sold option expires worthless

usd 12425 Money at Risk
usd 2450 Profit
= 19.63% in 41 days or 172.33% annualized
after the January expiration the next call should be sold.

stock and option tanks
The BreakEven Point of the bought option is $428.75
QCOM has to be at or above $428.75 @ expiration in Jul 2000
For possible repair strategies, I suggest to read "Options as a strategic investment".
If I have to repair the position, the annualized return drops dramatically.

announced stock split
QCOM announced a 4:1 stock split.
Information for the option contracts will be available from cboe.com

Did I forget something?
Open for any thoughts.

Peter
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News