"How do you make anything collecting prem while your stock goes in the crapper?
I wish someone would show me how ya make a profit on that sorta deal...."
You don't. I am not pretending that I did. I am posting to show what I did to try and improve on a bad situation. If you have never in your investing life had a stock go down in price after you went long, more power to you.
So, what you say is true, at the moment. In entering that position I was hoping to be called out in November at 22.5 and 25. Had I done nothing, I think that still could happen. Given that the stock has tanked far more and quicker than I ever expected, I wanted to take my profit from the calls and reduce the time to expiration from November to June. I may get called out at 15 next week, but I may buy back the June 15 calls if they are going for breakeven (0.95) or better. Whether I do or not, I think there is a chance that SEBL will be trading back in the 20s by the end of the year, so, if I hold I will end up at least even or better. Overall so far, no it wasn't a profitable move. But it was more profitable than just being long the stock. I thought it might work. At the moment it looks like I was wrong. But that may depend on the time frame used. Check back in November.
Because individual stocks are capable of unpredictably losing 50% of their value in a short time, as exemplified by SEBL, I am migrating away from holding individual stocks to using indices such as OEX and QQQ. And I don't want to give you the impression that I am only long stocks with CCs. Covered calls, as has been discussed here at length, are poor hedges in a bear market. I am long some QQQ June and July Puts which are doing just OK, so far, and I have an OEX bear June Put spread (long 520, short 510) that looks like it will be a double in two weeks if OEX closes below 510 at the end of next week. But those are not the focus of this thread. |
