I can't understand you shorting ( puts ) ... I hope you have covered
Tom,
Each person has his/her own style of investing. In this particular stock CYMI, I just happen to favor investing/speculating with OPM (other people's money). Disclaimer: I am already long on CYMI by purchasing the stock some months ago.
Let me illustrate to my approach. I just use Friday's closing numbers ( 30 1/4)and leave the commission out. Let us use 1000 shares for ease of calculations:
1. You read people posting today that they like the stock and bought at 29 or 30. They are convinced that the future is up for CYMI, otherwise they would not buy it. I happen to agree with those posters that CYMI will be higher in the next 2 months.
Am I buying it at 29 ot 30? The answer is NO. Why?
I prefer to sell 10 contracts Nov 30 puts (symbol CQGWF) at 4 1/8 (bid price), which nets me $4,125. In essence, I am saying: I am willing to buy CYMI at 25 7/8 between now and Nov 21.
What happens if CYMI never falls below 30 between now and Nov. 21?
I keep that $ 4,125 and use it to get about 100 shares of CYMI for free. And I might start over again while I have 100 CYMI in my back pocket.
Here I am shorting the puts . But actually I am long on CYMI (hoping the price goes up)
2. To go further: If I am really bullish and aggressive on CYMI and think that CYMI will be at least 35 within 2 months, then I would use that $ 4,125 to buy 10 contracts of Nov 35 calls (symbol CQGKG) at 3 1/4, spending $ 3,250 out of that money and spend the remainder to the take my beautiful better half to a nice dinner and go to Harry Belafonte show at Las Vegas Hilton. (Day-o, day-ay-ay---oooo) GGG.
Here I am long on my CYMI calls
3. The main factor is that I am prepared to own 1000 shares of CYMI at 25 7/8 (worst case scenario), or at 30 if I am really aggressive and CYMI goes down and my calls expire worthless.
4. Have I spent a dime? No. Am I exposed to CYMI and participate CYMI stock appreciation? Definitely YES.
Hope that helps. I have used this strategy on another biotech stock and just happy returns. This method works when the stock is in an uptrend or moving sideways in the specified period, and that you are willing to own the stock or cutting the loss by buying the puts to close position.
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Come Thanksgiving I will be at St Vincent de Paul serving turkey dinners to the homeless or if Cymer does not cooperate, be served (GGG)
Best Regards, and good luck to all.
Andre |
