CGARCIA,
Don't sell. What if you are wrong and aol doesn't correct. You will be screwed out of one of the best stocks to own. Additionally, since you pretty much already know that any correction will be short lived and aol will come back strong, why take the risk in not only selling, but also having to pay all that CG Tax.....
Why not simply fiddle with some PUTS. This way, IF aol goes down, you will prosper greatly...make mucho, mucho dinero, and if aol goes up, you lose your premium, but still make alot of money. What you are essentially doing is sacraficing some profit ( which you wouldn't have if you sold instead of buying PUTS) on upside in exchang for protection on the downside. Lets say aol tanks in half...well now, you would have lots of options. You could sell at your predetermined price, more then likely double current price ( if you bought puts and then stock was cut in half) and take a nice tidy profit, and buy back the shares immediately for half the price you just sold them for. Or, you could sell the contracts whose premium's are now considerably higher. You make lots either way. If the stock does not correct and instead shoots upward...well you can sell the contracts prior to expiration. You will of course get a lower premium then you paid, but still get some cash out of it. Or, simply let them expire worthless and do nothing..you lose your full premium, but still make alot of money because the upside on the stock will be considerably more then the premium you lose...and like I said, if the stock does go up istead of down, you would have made nothing if you had sold, so surely you will be happy losing your premium because you still made good money.
Anyway, I share your concerns about a summer correction, but will not take the chance in selling my shares. As soon as I sell, I am locked into a large CG tax to the govt. The stock would have to go down considerably for this to be worth doing. My biggest fear is losing a stock I still want to own. My worst fears would come true if I sold at $175 and got hit with a huge tax bill, only to watch aol shoot to the moon....I do feel we will get a correction, but it certainly is not written in stone, and it may not be all that bad. On the other hand, if it is bad, I still want my stock...and want to buy more when it's low. With all this in mind, I feel looking at options in an effort to hedge and protect is the best way to do it in this scenario.
Opinions anybody ?
KG |
