Well, you trade it just as you did. Or you sell covered calls; or sell a portion and keep some too.
For calls, I've just looked at my MSN portfolio to give you an idea. A few months ago I bought JDSU March 110s...it was presplit, I believe JDSU was in the low 190s. Since split, I sold some, and still have some I may exercise, but the percentage increase is of today's close 977%. Another example is NTAP, bought Sept 110s on 2/2, they are up 259%. Etc etc. Now I do not have a portfolio anywhere near your size--can you imagine what you could do buying 40 or 50 of such?
You are at risk, and I agree best to do anything on a market correction (sell puts, buy calls, go long)...but I always tend to buy myself some time. I believe Sept was as far out as I could go on NTAP. I picked a slightly OTM strike at the time so that I didn't have a huge amount of risk, but I could benefit from the pop. I can't bear to think of what I would've gotten if I'd bought CREE calls ont eh day Rocketman did, I was looking at the same strikes.
I am sure others on the board have better stories to tell, but I think the leverage is worth it--again, you don't get to generate margin unless they are leaps and you are with a full service brokerage...but if you don't do it extremely near term you likely can ride out some volatility on the way up.
For some reason I see that I bought March 200s on JDSU--I had entirely forgotten--I think I did it because of Poet, who loves to trade close in (and does it well). Now, even though JDSU is up, they are a buck less than when I bought--I'm going to sell them tomorrow. They'll deteriorate further next Monday. And even tho there is likely to be a pre-split runup and they'd become profitable, I'm not comfortable taking a risk that close in. |
