Ian : RE PUTS/CALLS
" one were able to cause more volatility in the stock "
NO ! puts and calls takes out a lot of volatility,
first a lot people use them
for many reasons, I bought some puts not long ago just for insurance
as I did not want to sell the stock..it went up..I didn't sell..
but I would have had I not had the insurance..well insurance cost
money..if you have a lot invested say in your car would you not
buy insurance ? why not with stocks..people that have insurance don't
sell as quick..hence less volatility..stop loss orders can get caught
in a sell off..and wind up selling way below were you had the taged,
or if u have a clause on them, well then they might not sell at all,
and so there u sit with a $10 stock that was $30 yesterday ..ie TXLN
some time back..
Nother reason:
Lets say I would like some more ATMEl but I want it at a lower price,
than it is at the moment..do I wait..maybe it don't go down ?
So I sell CALLS, down about 25, if she goes that low someone who
bought insurance will put them on me..at a price likly lower than
I was willing to pay, but if she don't go down..well I'v got that money from selling the calls, and in as much as I wanted to pay 28
instead of 30..I take that money I got from selling the calls and
put it towards the present price, which really gets me in cheaper
than the current price. So you look at any stock you want to buy,
you say if it goes down to $xx I'l double up and average down,
so first you sell calls at $xx, then you take that money you got
and apply it to a purchase..buying 1/2 of the position you are
willing to invest..saving a 1/2 position to buy in the event she
falls..( if you belive in averaging down and I do ) but you might
want to do 1/3 positions,, recently I had to double up three times, before the stock hit bottom, if you have
faith in the stock, you buy more when it goes down, and if you are
selling calls you can make your plans ahead, and also use the money
you get to reduce the cost of what you get in for.
I won't buy any stock if it does not have options..it's out
of the question..you can't plan for anything..it's the same in
reverse..I'm ahaed do I get out of stay in..if I want to stay in
maybe I should lock in some profit by buying puts..it beats hell
out of stop loss orders..but I said that already ?
When I first buy in never over a 1/2 position mostly 1/3, sell calls
at a lower price, use that to reduce the buy in, and wait untill the
option expires before buying more, like ease in..& sell calls first
it gives you and advantage..stock is going up and I think it
will go more..but I buy puts just in case,,then I know if it goes
down to $xx I will want to double up anyway, so I sell calls at $xx, and use that to pay or help pay for my insurance..in the long run it stabilizes the stock price ( some ) and protects you from the herd
run wild..
jim |
