Thanks Herm. You like the new 'TA' link? It saved my butt on INVN today!
INVN's supposed to announce earnings real soon now, and I've been waiting for that to happen so I could write some calls. Well, after looking at this TA page for INVN:
iqc.com
and seeing how the Stochastics has been predicting the buy and sell points really well, and how a sell point was real close today, I went ahead and sold my calls. See today's black candle, with the nice tall shadow on top? I wrote the calls at the peak of that shadow! INVN started dropping within half an hour, and closed nearly halfway to the lower band. I may even get to dippity-doo before earnings, if they hold off until the end of the month!
Here's a neat strategy question: I'd been holding INVN at a net cost of $12.66. When I was trying to decide which options to write, I seemed to have four reasonable choices: Nov 12.5, Nov 15, Dec 12.5, and Dec 15. Based on the chart, it didn't look like INVN would be hitting $15 anytime soon, unless the earnings report was pretty good. It did look like it might drop near $12.50, though. So, by Nov expiration, the $15's would probably be worthless, and sometime between now and then the $12.5's would be at-the-money.
Another factor was the delta on these options. The 12.5's were .72 and .71 for Nov and Dec, and the 15's were .43 and .48. I figured the higher delta options would be better, because they would lose value faster in the short term drop the TA was predicting.
I ended up writing the Nov 12.5. I figure I've captured the time value, and also the intrinsic value, if INVN drops close to $12.50 before Nov. expiration. Selling Nov instead of Dec means faster time decay, especially after Nov 1. If I don't get a chance to buy them back, I still get a nifty profit if I let them be called away. I'm not sure I want to hold INVN much longer anyway.
So, what do you think of my analysis? Sound or unsound? Would you have done something different?
Doug. |
