Randy:
Depending on the number of options you have, the following scenario
might eat you alive in commissions. But, IF (repeat IF) I were
going to try and put on a hedge, I would not do one that merely
assured I would break even.
You must have paid about 4 3/8 for your options.
Given the closing price of the 47.5's & the 55's today, you are
leaving $450.00 "on the table" for the opportunity to make
a maximum of $750.00 (750-450=300/450 =66%)(Put another way, that is exactly the same as betting on a *whatever* where you have to put up $150.00 to win $100.00). Granted it is profit. BUt, I personally have a very bad habit. If I see money in my hand, I get the weird notion it belongs to me. I do not like to lose it.
IF you really feel the need to hedge, yet do not want to take the profit & walk to fight another day, consider this:
Sell the November 60 call /buy the November 50 Put: Net db/cr=0.
Now, you have the same $450 at risk but your potential return is:
is 1250-450=800/450 = 177%.) Now you have more potential $reward
than $risk. In addition, IF the stock tanks, you start making money
on the put under $50. AT $49, you get $1 on the put + $1.50 on the
call. If you get REAL lucky & the company goes chapter 11, you have
a bagger on your hands. <g> (Bagger is when you need a hefty bag
to carry your settlement day money in. <g>)
Now, you literally cannot lose, and you did it by increasing the cap on your profit potential. Is this a great country or what?
Doug |
