As a follow-up of my response to you that the extrinsic value of May 67 1/2 CSCO call is inexpensive, I would incline to buy that call. If I were at the other side of the coin (short on the call) and don't want to lose the stock, I would close my position. Assuming that those 200 shares are not on margin, they allow for selling naked puts to generate cash to buy back the CSCO CC. Right now JDSU Sep 105 put at around 16 is attractive. There is room to sell 2 contracts with enough cushion should the market goes south. Cash flow wise you should be fine:
- you retain your 200 shares of CSCO
- you keep your 200 x $ 7.25 = $ 1,450 original premium for selling May 67 1/2 call
- by selling Sep 105/jdsu puts you generate 200 X $ 16 = $ 3,200 cash
- with the above funds from the put you buy back your CC at 200 X $ 15 = $ 3,000, thus pocketing extra $ 100
- you declare to the taxman a short term loss and take a deduction of $ 3,000 - $ 1,450 = $ 1,550 from your CC on CSCO
- you pray daily that jdsu will not fall below $ 105 by Sept 15 so that you can keep the premium, and that your csco will keep appreciating andn think what to do with that extra $ 1,450 you are keeping
it is late, so good nite
paul |
