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I think I understand your question. Let me first say that I'm long on
VVUS and I expect VVUS to hit $40 in the future. In the meantime, I'm
going to generate as much income off the CCs as I can. So, I'm holding
off until sometime this week! I'm not planning to "bale out" of VVUS.
Think of it like a new horse that needs to be broken in order to be
able to ride it safely and with some control. Well, I'm trying to make
a buck and not get thrown from the horse. Meaning, I want to get ahead
of the stock in order to predict the strike price range each month.
In the meantime, I want to bring in CC premies and not give up the
stock. I want to use the premies to protect myself with PUTS or enhance
the VVUS spurts with CALLs on the side. Again, I'm using the money from
the premies to counter ANY POSSIBLE MOVEMENT FROM VVUS at it moves along.
There is no way VVUS is going to head south for any LENGTH OF TIME with
the current variables in place. I'm not in a rush to do ANYTHING by
this coming Friday since I own the VVUS 1000 shares. I'm not looking
at writing any July calls. I'm looking at August or September at a
strike price at or above my net cost basis. When I write the CCs my
net cost basis will drop further. Hence, if the price of VVUS does
dip my protection is the money I collected. I view CC premies as my
working dollars. My hard money I consider my capital which I must
protect. My working premies or income MUST DO THE WORK to protect
and enhance my capital. Every time an experation date passes and
I am able to keep the stock and the premies, the premies now become
part of my capital.
Notice, I don't even worry about the price of the VVUS stock. If you
are taking care of business up front with the CCs and PUT or Calls on
the side your profits will continue to grow. Appreciation on the stock
is just EXTRA GRAVY! The neat part is that you have control of the CC
process and buying calls and puts. You don't have control of the stock
price itself. You just try to anticipate and react to the conditions
using all of the option tools. That will steer you in the right direction.
Also, I do reward myself by taking out cash advances from my account to
buy things in my life, my family, and church. Investing is like running
a business. You need to keep an eye on the register and figure out how to
increase profits and lower your overhead. This game is no different.
Inventory, cash flow, working capital, margins, profits, and return
on the investment of my time and effort.
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