Elmer, regarding writing CCs, am glad the analysts were accurate in their expectation of good results because this minimizes the risk of surprises (headaches) when writing CCs. Writing CCs is great if the upward change is gradual, i.e. expected. But am hesitant to write CCs moving forward because improvements in forecast and GMs translate directly into stock prices.
Probably have around 15% or so of the portfolio on CCs at this time with various stocks (down from a high of 40% of the portfolio during the recession), so CCs are not large enough of a portion to create too much concern at this point. Maybe the bigger risk is if stocks see-saw longer than expected, while not being aggressive on CCs. A quick look at Yahoo's options table on Intel a few days ago shows if the stock goes up more than expected while writing CCs, a person could roll calls over all the way thru to maybe $32 or so without too much difficulty over a year. Doing this drill with Cisco, shows if I write CCs now, I'd be safe with roll overs up to at most $24 but that price doesn't feel comfortable over a year so am going to hold off writing CCs until Cisco goes up more to allow for more ceiling. Am not sure about writing CCs on Intc.
Writing CCs, plowing these premiums back into buying shares, combined with dividends from an increased number of shares via writing CCs, is a great for downturns.
But I don't have a handle on how much CCs I should do in this type of situation with Intc - where deficits/oil/interest rates drag on it - conflicting signals. In times of doubt, I usually go lighter on CCs, wait and see.
It was easier during the downturn, when everything was consistently bleak. It's even easier when a company stumbles because you get more chances at writing more CCs, but where I am a bit puzzled, is with writing CCs in today's scenario - a good report but bad trade numbers. Am easing up on CCs while I try to figure this out.
Regards,
Amy J |
