<<EXTR's paying well but its volatile. >>
The volatility is your friend in this instance. Look at a 30 day chart for extr. It goes up and down in fairly large % moves, and does this almost on a daily basis.
First, if your just looking for a buy write and be done with it....extr is paying OVER 10% for OTM calls, then IF called, the % gain is much higher. However, what I've discovered with extr recently is it is the volatility makes it a great stock to buy on a dip cover immediatly with next month otms and take your 10 -13% ( or buy the dip and wait to cover after it comes back a few points...more risky though). Wait til you can buy the calls back for less, buy them back...wait for stock to move up a few points and do it all over again. Just in the last 3 - 4 weeks, I lowered my cost on extr from around $39.50 down to about $30 - $31 while staying covered, and that was on only 2 write/buy backs.....I actually played with it on a paper and did some paper write.buybacks on extr and believe it or not, had I actually done them, I would now have a cost of about $7 on extr....thats how up and down it has been and that makes for writing and buying back CC's something you get a chance to do almost every day with the way the stock moves.
You could also do very well just buying extr on a dip, and then selling it after it moves 10 - 15%...buy it back on dip and so on.....BUT, by trading the cc's instead of the stock, you are at least covered some on the downside and before you know it, your cost basis on stock is so low, it is ridiculous.
I know I for one an going to try and implement CC's much moreso this year. Last year would have been far less painful had I wrote cc's every month, but alas, I thought we were at a bottom and therefor didnt write as I expected naz to move upward, not downward. This year, regardless, I will cover some stuff and will also play the write/buyback thing on certain stocks that allow it ( high volatility )...
Good luck
keith |
