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Technology Stocks : JDS Uniphase (JDSU)
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To: MileHigh who wrote (4136)1/9/2000 12:44:00 PM
From: Guy Gordon  Read Replies (1) of 24042
 
RE: Icing on the cake.

Yes, I have a broker who does this all the time -- makes a few extra points selling CC's.

But what I want to do is to protect myself from the downside when my stock is at the top of the channel.

Let's say I have 1000 shares of JDSU, and it's at the top of the channel at 189 on Jan 3. The bottom of the channel two weeks ahead is 145. So I'm looking at a very real possibility of losing $45,000. I'm not so much interested in making two extra points as I am in protecting myself against a 45 point decline.

What I'd like to do is sell the Jan 150 Calls for about $40. This removes most of my downside risk. (It also removes my upside potential, but the channel tells me there isn't much there.)

So, lets say I sell those Jan 150 Calls, and JDSU goes down or maybe sideways. When do I buy them back? That's my problem.

A strong stock like JDSU often will not go all the way down to it's 26-day MA or the bottom of the channel. Too many buyers want to get in. Just look at that pop we got Friday. What I need is a good rule or indicator that tells me when to buy back my CC's.

I'm afraid this is leading me towards being a long-term investor in JDSU, but a day trader in the calls. I'm not sure I like the idea, but the amount of money involved is too great to ignore. You could make a year's salary being right a couple of times.
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