No way was QCOM retracing back up to 145.
Never say never. There is no way you can know what the stock will do. If you knew, you would've sold at 200. The ride up was unpredictable, as was the ride down. If you made some money on covered-calls, great. Be happy with your money, but don't lull yourself into thinking it is proof that you know where the stock is going next week or next month or next quarter. Why should the direction from here be any more predictable? I think selling covered calls now is kind of closing the barn door after the horse left. The problem is twofold:
1. The underlying price is lower, so all option prices are down (compared to when it was in the 170s and 180s).
2. Volatility has temporarily imploded, so one does not receive a lot for time premium.
As a result, the calls you sell now you sell "for cheap". If a cataclysmic event occurs (such as a major China agreement or Nokia ASICs agreement), the stock could pop suddenly. The price would rise and volatility would shoot back up. The options you sold for low single digits could become quite valuable (and painful to buy back). In other words, I think this is more a buyer's market for QCOM options. Why sell into a buyer's market? Better to be a buyer. If you like to sell, look at other issues where the volatility remains (selling puts on JDSU comes to mind). A simple idea: sell what is expensive; buy what is cheap.
All this doesn't mean you can't pick up some nickels in front of the steamroller, but understand that you need to be very nimble. I prefer to go where the odds are better, where I am likely to win even if I am not nimble on a given day. Take the fat proceeds of expensive put sales (I've enjoyed these on SDLI and JDSU in the past) and then you can buy more Q shares or options on the cheap.
Good Luck, Mucho Opportunist |
