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Howdy Ofelia,
>I still have quite a lot of learning ahead, however, I think this
>is what you do:
Well, that's what our forum is all about. Perhaps a bit more people
oriented, profit oriented with controlled risk/rewards. and visited
by knowledgeable investors using real money! This forum is not a
game, an exercise in "theory for theory sake," or paper trading.
>1) first, select a company with excellent fundamentals;
>2) use technical analysis to pinpoint the timing of your entries
and exits; and,
>3) with these two factors in place you structure a multitude of
> option plays (most of the time leading to a long season of
> covered call writing).
You have the big picture! Using the option tool shed with the right
approach for you comfort level to make profits. We are batting three
for three in the recomendations. And, some people are still in those
stocks. It's just a matter of repeating the same steps covered in
past postings. Of course, we will continue to seek out other
opportunities and repeat the process for the new readers that join us.
>On the VVUS I picked 5 contracts, July 22 1/2 @ 4 5/8 and 5
>contracts @ 4 (I was in before the dip last week). I am not sure
>I can handle your alternative #3 yet (looks ominous to a newbie).
>Would it be done by exercising Thursday, writing September/October
>35 strike price covered calls on Friday, the PUTS and CALLS later
>on, depending on whether the stock went up or down?
>Herm, thanks a lot for your input. Gave me a lot of choices!
Bingo! You have it all in sequence. Basically, what we are doing is
playing off the typical characteristics of stock splits and earnings
reports. All three of our stocks ROST, TECD, VVUS, had those elements
that we played out. Although, VVUS was lacking in MUSE for while!
The earnings report was a mind blowing success that will skyrocket
tomorrow. We need to figure out the new FY97 fair market value for
VVUS by now multiplying the expected earnings of $1.02 X 30.8 P/E =
$31.42 on the low side with two more quarters worth of profits which
will no doubt exceed the orginal .88 FY97 post-split earnings. It's
already at $1.02 pace. So, let's say earnings of $1.30 x 30.8 P/E=
$40.04 as the high fair value and about the old 52-week high.
I would not go out farther than August on the covered calls.
>(By the way, your posts are missing the first letter of every line, don't know if you had noticed)
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