Steve, I use this strategy in almost exactly the way you mention. If you have read my notes, you know that I like to use a thirds strategy to enter long stock positions. So, if I owned a third of IGT and would buy more at a lower price, selling the put makes some sense. Basically, I would use something like this, or covered call writing, which is the same strategy, when I like the stock over the long haul, but don't expect it to go gangbusters short term.
Covered call writing or secured put writing are indeed a mug's game. That is why I do it so rarely in my accounts. But, the individual issue and the premium levels can tempt me every now and then. I think it is a mug's game especially in zero/one situations like Compaq. Either they are going to be one or two or three firms that totally dominate pcs or they are going to be creamed with the other players in this downturn in pc sales. So far, the former
has held up. But, if you believe that, there is too much money to be made on the upside to cap your gains. And if you are wrong, too much to lose to make the option premium protective enough.
With IGT, they already dominate their industry, and will grow with the replacement business and new market openings. New innovations, like the deals with BETM, GTK, and IGCA, are nice, but won't mean much to a big co. like IGT's bottom line. Business risk is minimal, though there is stock market volatility.
I think the geezers will win tonight. But then they have to go back to that place where they drink water out of a salt lake. -g- In either case, I think the Rockets and the Jazz have pounded each other so much that the Bulls will blow either away in the first game. After that, we go to school. Don't tell anyone, but I think the Jazz are the best team in the league, though I hope the Rockets stomp 'em. -g- MB |
