thanks for the roses (still looking for the thorns), but you give me a bit too much credit. First, I got 'em at 50.5, not 47. Second, it was less a victory for timing, which I'm lousy at (like most everyone), than for gaining psychological comfort by accumulating a position through a number of smaller buys on dips over periods of time rather than in one fell swoop.
I have a nice position in NTAP common, which is locked up in the personal strongbox for the duration. I wanted to add some derivatives as well for extra oomph, and so picked up some calls during the spring. When LEAPS became available I decided to switch the regular calls to LEAPS calls to avoid a GMST-like disaster (that is, getting the trend right but the timing slightly off and thus going down in flames). So I took advantage of what seemed like nice prices in later July to sell the regular calls around 108 (posted that trade here, don't have time to link it thanks to baby in lap) and decided to try to time the LEAPS buys to take advantage of NTAP's volatility.
Well, sure enough, within a couple of weeks after I sold the regular calls NTAP shot down into the 70s, and I was feeling pretty good. Then suddenly I felt like a total moron, because I had forgotten that I was waiting for a good entry point on the LEAPS. By the time I remembered to buy in the common was back to the mid-80s--fine, but not nearly as good as it might have been.
Rather than acquire the full number of LEAPS calls that I wanted, moreover, I only bought a third, figuring that I could pick up the rest on dips over time. I didn't think that this strategy would necessarily get me a better price in the end (as it hasn't, at least so far), but rather that it might save me from beating myself up too much if the whole market tanked in August-October and I had no dry powder to pick up some real bargains.
Naturally, after I bought the price shot back up, and I had that mixed feeling one has in such situations--glad that it rose because of what I had already bought, but pissed that future buys would be more expensive. When I happened to notice that it had pulled back >10% off its recent highs, therefore--and realized that I would not have much time to watch things closely in days and weeks to come--I picked up the second bundle of LEAPS calls. I figure I'll go for the third tranche if we ever get down to 90 again or if the fall rally seems to get underway in earnest, whichever comes first.
in the end, I would probably have done at least as well if not better by making the whole purchase back when I sold the regular calls, and a good trader might do much better by watching closely and taking advantages of real spikes down and up. But I did gain a measure of comfort by not being too exposed at any one time, and a measure of gratification by buying off a recent high, both of which are nothing to sneeze at. And since I am extremely bullish on NTAP over any reasonable time-frame, the absurd valuations and rich price of the LEAPS doesn't bother me as much as it might someone more value-conscious and conservative.
tekboy@alwaysaworkinprogress.urp
PS Loffy, don't let him needle you, I've followed your calls and you're right far more than I am.
PPS think I just found the thorn: "Tekboy's due diligence." Like many others I've just copied off DS's homework, so get no credit for original work. Now, "doo-doo diligence," that I get credit for... |
