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Technology Stocks : Full Disclosure Trading
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To: Return to Sender who wrote (9238)8/24/2004 7:25:37 PM
From: Sam Citron  Read Replies (1) of 13403
 
OT It's very simply. Someone is paying me two thousand bucks in return for my willingness to buy 1,000 shares of Ligand at a price of $10 for the next 6 months.

So my break-even is $8.02 including commission. From $8.02 to $10, every penny a share higher is worth $10, with the profit potential maxing out at $2,000 at a price of $10. So my upside potential is limited to the $2,000 I was paid for selling the put. But my downside potential if the buyer of the put exercises is $8,020 if the stock goes to 0.

Why is this attractive for me? I think LGND is probably worth between $10 and $15, but it could go back down to $7-8 temporarily. I have convinced myself that it will be a good LT buy at $8 so I wont mind if the buyer of the put exercises it. At the same time, if it goes up to $15, I will regret selling the puts instead of buying calls or stock and I will cry all the way to the bank with my measly $2k profit.
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