Gottfried, Tito or anyone, I am looking for a little advise.
I recently I sold some stock to raise some cash for purchasing “futures” Calls. I’m at about 40% cash and want to buy some futures with a little safety margin.
What I’m thinking is AMAT Jan 04 Call. I believe I want to buy “in the money” calls. I understand each contact is for 100 shares.
Does this sound correct?
I want to buy 50 AMAT $10.00 Jan04 Calls and I pay $4.00 each (Friday $14.32 close). This cost me $20,000.00 at the time of purchase. Now I control 5000 shares and my return is anything over the $10.00 price.
So in Jan 04 if the stock is at $20.00 a share, it’s a gain of $10.00 @ 5,000 shares or $50,000.00, or 150% gain.
If I had bought the stock at the same time it would cost $14.00 then $28,000.00 I would have 2,000 shares. After the $20.00 price is reached it is a $6.00 gain or $12,000.00. But as I also own the stock still, I’ve the original $28,000.00 or the stock is now worth $36,000.00. That is about 30% gains.
I am currently holding over 5,000 shares of AMAT within the 12,000 shares covering 12 different companies stocks.
So is the 150% over a 30% a much more risky method or by buying in the money call has lower the risk enough to be fairly safe bet.
Anyone, any thoughts?
Thanks
Stan |
