Michael July re: ["Slider, two questions for ya....
1) Why not buy the individual stocks? Are you expecting only a short term but explosive move.....hence the options.
2) If you care to divulge....are you accumulating as the stocks head down or will you wait till they get closer to those targets? "]
...I added some individual stocks on the Oct 10th pullback and I will mainly add options & leaps if we reach that HUI 95ish low area of this past July. I probably won't add much "on the way down" - but, will rather wait untill we see those July lows reached... and will watch the technicals - especially OBV to see if we get some heavy accumulation into that pullback which I am sure we will. On an individual stock basis - I would add as the situation dictates... If I like the way the sector & POG is acting,but we get some exaggerated downside action in individual stocks - I may add KGC ea. .25 cents down or, DROOY sub $3.00 tomorrow/monday etc.
The reason for leaps & options is leverage. I can retain lots of cash, but buy "time" and retain upside leverage.
If I buy HUI 95 (options & leaps) and we fall thru that level, I will stop out of my "common/individual stocks" that I just added on Oct 10th (10-15% loss trigger) reducing my total $ exposure, but retaining a high degree of remaining upside (and time) by retaining the options & leaps in lieu of the common...it works for me.
Also, if we get a quick pop off of a HUI 95ish pullback, I can flip those options for quick levered pop's and retain my common (again added at the HUI 95-110ish lows)... or if I think I may want to raise cash to re-enter the broad market either long, or short; I can sell the common - giving me a huge cash position; but retain the options & leaps...and if I find that I sold too quick on the gold move... while I'll have much lower $ exposure to the remaining upside...I'll have leverage.
It's an "on the fly" audible at the line of scrimmage type of call... depends what's happening in the broad market.
If we get a nice Gold Stock pop and the DOW & S&P also pop... I'd probably dump my commmon, use that cash to go short the broad market and raise tight stops up behind my retained gold stock leaps & options.
Or, say if we blow right back thru DOW 7,000, but then see something positive on the economic & geopolitical fronts (say Saddam is assasinated/overthrown from within)and I want to throw 10-15% in on the long side... then I can also dump my common and just keep some low cost/entry point LEAP's hanging out there....but, on any nice upside move, I move stops up tight behind what I retain.
I want to keep 30-50% cash for potential Rogue Wave/Event Crisis opps.... options/leaps give me the ability to maximize my bang for my buck & keep my Cash positions high and give me flexibility options with my common shares.
For instance, if I'm sitting strong at 50-60%ish Gold/PM stocks and we ramp to new highs... say HUI 175ish... I'd probably sell all my common and use a "portion" of my retained profits - to buy some outlying calls & LEAPS - defining both my minimum retained profit (if the options and leaps expire worthless) and my total cash exposure.
On anything over $400 Gold excluding something on the order of a Nuclear WW III, or total global financial breakdown...I'd probably only be participating in that new high upside via flipping calls...at HUI 175-200, or $400-450+ gold...I won't be greedy and I won't give back the doubles, triples & 4-baggers that we will have earned.
That's what killed the Techies in the NAZ... they stayed margined and fully exposed all the way up - they made a fortune, but lost an equal fortune on the way down - continually buying dip after dip and lived & died on margin... I know it's easy to say in retrospect... but, if people would have cashed out at Naz 3500ish and only flipped calls above that level - they'd have caught much of the parabolic blow off top, but if they kept rolling over calls... would have eventually been stopped out via worthless expirations and they'd be the Kings of the World today... we should remember what happend to the speculative Bull not just in Gold & Silver in '80-81, but the NAZ of late as well.
If we ever go parabolic in Gold... I'll be virtually left in only call's and will keep pocketing at least 50% of the gains all the way up and only rolling over the other 50%; giving me less and less total $ exposure the higher we go - but, I'd keep increasing my leverage by moving them more & more out of the money.
My goal is not to be the guy with the most $ in at the top... but,rather to be the guy who keeps tucking away the most $ safely tucked away in the cash register all the way up & who gives the least amount back when we finally roll over (vbg).
Just my .02c
PS: ND vs Air Force tomorrow... AF is also 6-0; could be interesting and ND is not looking past them to FSU...although I am (vbg)...and then:
WE WANT MIAMI... |
