pinhi,
In my example I said you were using the original buy/write for income. If the stock tumbles so that the intrinsic value is gone, buy the CC's back & write again at the money. This second write lowers your cost basis. In the examples you & clappy discussed, like QCOM, there would have been 2 or 3 times in a month to uncover & re-cover the stock, lowering the cost basis further.
If after covering, the underlying stock recovers & you are about to be called, you can roll up & out.You will take a ST loss on the last CC write, but your should still generate sufficient premium on the roll up to pay for the loss & provide some income if need be. Also you will still hold your original shares at a higher price. Besides, look at QCOM this yr. It ran a few times & you may have rolled up & out. However, it still turned back south, providing you the opportunity to uncover those CC's & re-cover at the money again, thus lowering your cost basis again, or providing you with your next months income.... albeit, you may not have a banner month for income when your vehicle gets a buzz cut.
FWIW, when situations like this occur, there may be times when you may not by flying first class to the beach & drinking Dom.... but you should be able to meet your essential needs until you can work through this unusual correction that has jeopardized your vehicle..... & your future if you insist on consuming 100% - 100% of the time.... suggestion.... leave a little room for just exactly what happened this year..... better safe than.....
OOF :-|
Tim |
