I was actually considering this one (from the fool)
For those relative new to options strategies, here is one for you. It is really simple.
Rambus is now $30.00. If you believe that by February 20th, 2004, the stock price will be higher, then you can write (sell) PUTS for $5.00 per share. If you own 1,000 shares, you can pick up immediately the sum of $5,000 in option premium.
Upside: If on Feb. 20th at COB, the stock is above $30. then you keep the $5,000.
Downside: If on Feb. 20th at COB, the stock is below $30., then you must buy the stock at $30. However, the net costs will be only $25. since you already have received $5.00 per share.
If the stock were, say, $27., you would still net $2.00 per share.
If the stock were, say, $23., you would lose $2.00 per share.
To do this strategy, you must believe the stock will rise by Feb 20th. |
