Semi's Option strategy Part 2
On a daily basis I discuss options strategies with a couple of broker friends here in town. Essentially we write covered calls and figure out some workable spreads using stocks like AMAT, NVLS, ASYT, ATML, GSNX, SSTI, KLAC, INTC and ORCL. Mostly its the semi's we concentrate on.
There are some basic rules we try to re-inforce among ourselves on a month to month basis.
Rule # 1 Take what the market will give you
On Monday when the market opens I will be buying AMAT on the open and a few minutes later writing some covered calls at the Jan. 40 or the 42 1/2 strike.
I will be doing the Same for NVLS but here I will use the Jan.35 strike.
Rule# 2 The best strike for gains is 2 1/2 points above the current stock price. This would be for stocks under $50 and over $20 per share. Ideally if you do the math properly (subtracting all commissions) The gain from call out and the the gain from the call premium should equal about 15% . Example Monday Morning Buy AMAT at the closing price of 39 1/2. Sell the Jan. 42 1/2 for 3 1/4.
Rule #3 Don't waste time trying to interpret market direction. Smarter people than most the thread posters here have failed.
Rule #4 Don't get sloppy Do some basic research on the company you are using for the covered call. I have never written a covered call on a .com company, or a company that I didn't feel was a worthwhile investment on its own merits.If the call premium seems excessive go with caution.
Don't be afraid to ask for help. This thread has numerous outstanding posters suck as BK, Gottfried, Stromberg,Sam, Michael, Salzberg, and Kirk that will answer any questions.Whatver you don't know someone on this thread has already figured out.
Good Luck, Jerome
Note: If the usual thread posters would rather I take my option strategies elsewhere please say so. |
