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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Alias Shrugged who wrote (83858)3/22/2001 12:49:30 AM
From: chic_hearne  Read Replies (1) of 436258
 
taking a small portion of your investable assets and doing "buy/writes" on a collection of beaten up yet fundamentally sound companies.

I've been doing this now with one stock for a few months. After the calls I'm in at a little under $9 and it's trading at $6 and change now. It's only a little coin and acts as a hedge to my shorts, so the loss doesn't bother me considering the way the rest of my stuff looks over the same time. Call premiums are still off the wall IMHO. I can't imagine this continues. I'm still getting at the money front month for over 10% and over 100% on '03 leaps.

Needless to say, I'm not going to be so quick to grab the falling knives even when they are trading near book in the future because more down is still a distinct possibility as the general market tanks which enacts Greshams Law that the bad stocks drive down the good as people exit the market. But I do think buy-writes will be a GREAT strategy when we do get near a bottom because people will remember what happened and won't be as likely to hold a double, which will keep us in a narrow trading range for some time IMHO. If they want to give mucho premiums, I'll take 'em. In a few years, I won't complain about a 30% gain in a year on a particular stock even if it pulls a '99 QCOM on me.

BTW- I refuse to sell calls on Gold stocks. For two reasons, one either Gold explodes and I give up lotsa cash, two Gold doesn't explode and loses its value and I'd tie up tons of commisions and waste money buying the calls back when I'd throw in the towel and give up. I lean towards the first posibility, but I'm slowly giving up as the yellow dog hasn't done shit in the face of what's going on. [btw- I do own a little PHYSICAL gold in a safe deposit box, but no stocks at this point]
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