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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: JGreg who wrote (2623)10/31/1997 12:38:00 PM
From: Big Dog  Read Replies (3) of 95453
 
Re FGII options:

I have been trying and trying to devise a nice strategy and have come to a dead end. I keep coming back to the simplest way to go -- just sell the calls, so here is what I did today.

I sold 72 Feb 35's for 9. This brings in $64,649 net of commission ($151 w/Ameritrade). This protects me for 9 points below the current stock price of 38.25, or down to about 29.25, should the stock have a tumble. I like this protection.

But what is more likely to happen is the premium will erode (it should erode at approx 6 cents per day, incl. wknds) as time passes and one of these days the stock will take few point tumble and I will close the position for a few point net gain.

I see selling calls as a good bet for people that have a stock which they have a profit on and that they will continue to hold. I have so much faith in the future of FGII that if it would go down below 30, or even 25, I would not sell as I know the pricing and earning power of this company. That is not to say there will not be price movements up and down along the way.

Rather than just sit there and not make money on those swings, I think selling covered calls is a very safe way to profit. I also still have some stock that I have not sold calls on, plus I will day trade for 1/2 to 1 point (which I have done 6 times in the past 3 days). The theory on day trading being that I don't mind if I "get stuck" with the stock as I KNOW it will be higher down the road.

I am still trying to learn about the option strategy called Calendar Spread where you sell the near month covered calls and buy the next month calls at the same strike price....can anyone help me with this?

I also added 1000 CKH this morning. For the life of me I don't know why this stock is so cheap.

mike
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