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Strategies & Market Trends : Contrarian Investing

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To: fedman who wrote (413)	10/3/2006 4:52:35 PM
From: Kirk ©	Read Replies (2) of 4080

I mean, the stock has a 52 week high of lets say 40.00. It's trading and 30.00 and you think it's going lower because you see weak fundamentals. You write a 32.50 call for 2.50 for about 3 months out. There's no way I'm going to waste my money on a $40 call. What I do is if the stock gets to 32, I buy half the underlying. Then if it gets to 33, I buy the other half. Or I buy it out if it is near expiration. What do you do if right after you buy the second half at $33 some news is released that gaps the stock down 30%? Lets say someone gets sick at the coffee house and they can't figure out why such as happened with Spinach. You were right but your timing was off and you lose big time. Likewise, a buyout for a 30% premium would also hurt...

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