Hello Jill & Victoria!
Ditto with what Victoria said! You have a good plan and you
use it with specific criteria in the selection of the
parent stock to begin with. In essence, you have a trading
plan that matches your risk vs. reward comfort level. You
can't ask for more if you are getting the kinds of returns
you indicated and you are able to repeat the process with a
7 or 8 out of 10 success rate.
Further, it sounds like you have a game plan in the event
the stock tanks! Let's look at the charts of those stocks
you mentioned and see if there are any technical indicators
that pinpoint the entry and exit points for your approach.
GENERAL TECHNICAL INDICATORS
1. Below you will find the daily profiles of each of your
picks along with the BBs, RSI, and OBV indicators as
additional tools. We want to look at the chart in a weekly
profile as well since that give you more of a "big picture"
of the major market phase or trend for each of the stock.
2. You could review the industry indexes for each of those
stocks to see where the whole group is heading. Thus, you
can narrow down how many issues you look like when you do
your home work.
3. What you will find in order to carry out your mentioned
game plan is finding stocks with super low RSI, low OBV, and
at the same time are coming off 52-week price bottom
patterns. The criteria can be modified more often if you are
keeping the expirations short enough like two or three weeks
out rather than the longer time periods.
4. The pre-defined exit condition or factors would be upper
BBs tags along with high RSI readings for that particular
stock. Of course, those readings vary and could be
ascertain by simply reading the chart patterns when you
plot them out using the technical indicators mentioned
above.
Now, I will say this. You could continue to do what you are
doing. This approach would be best suited for an IRA trading
account since CCing is allowed. Otherwise, you could get
more bang for the buck by doing calendar Call Bull Spreads.
You buy the ITM lower strike price call and sell a call
up strike from yours with the same month of expiration. It
does carry more risk with a higher reward factor. After all,
we are talking about having more useful "investment tools"
in you personal tool shed. Another possibility that I'm more
inclined to is buying the LEAPs and then writing the spreads
because you have much more time to hold the LEAPs or dump
them for the remaining intrinsic value.
The point is this about my two alternatives. You get to put
down much less money than simply buying the stock and then
writing the calls in the covered call writing technique.
Yes, you can do a "buy/write" opening transaction with the
spreads provided you have a brokerage that can handle that
kind of trade as one opening transaction. I do LEAPs spreads
like that often.
In my mind, I rather pay for the LEAPs than buy the parent
stock. I had a bad trade recently when I picked up some
LEAPs calls and they quickly went south. Open interest dried
up real fast as well. I'm down still on 4 contracts which
cost me only $400 so far. But, the stock would have cost me
$3,200 instead. I don't like being down but I can leave
with down -$400 and not lose a night's worth of sleep.
Down -$3,200 would stick in my gut, pride and keep my up at
night. Besides, I still have over a year before expiration.
CMRC
209.15.73.188
PALM
209.15.73.188
NTAP
209.15.73.188
Thanks for your participation Jill! |
