Sonki,
AMAT is one of the very volatile tech stocks I've traded this year. I couldn't understand why it was flirting with the low 40's about a month ago. Now, it's aiming for 70. I must admit that, although it seems ahead of itself, it does have a certain magnetism. My concern is that buying it now would cause me to wait longer for a return, but I'm very bullish on AMAT in the long run.
I'm starting to get a little worried about you and your leaps. Everyone has a different investment strategy, but mine has been to buy leaps when stocks look really beaten down, and either buy stocks or sell puts when I encounter a situation like AMAT. What if there is a large and prolonged correction later this year as some have been predicting? It doesn't mean that AMAT would be a bad investment even now, but leaps all of a sudden become a more dangerous proposition. When I started at MSFT in '92, I got an option price which was not profitable for almost 1-1/2 years. If I was in leaps at that time, I'd have been losing time value. If it was today and I bought 99's, I could stand to lose a lot of money. When I think something is tremendously undervalued, I like leaps. When it's a great company, but seems a bit ahead of itself, I think stock is a better way to go.
When I first started investing large amounts (to me), I was lucky and made a lot right at first. Unfortunately, I thought that my experience demonstrated that good stocks always go up. In the next few months, I got very agressive with that premise and proceeded to lose my profits and 40% of my capital. I learned the hard way that "preservation of capital" is quite important. It took hard work/research to recover from that loss, but I did. Now, I prefer to invest in pre-corrected stocks such as AMAT, INTC, CPQ, or CSCO earlier this year. Recently, I made money on DELL and then sold puts against it. If DELL goes down, I'll buy it, but at a discount due to my puts.
Whatever you decide, best of luck!
Mike |
