ASND options advice sought. Anyone have any ideas on how to use options to play ASND if you believed that it would reach at least 30 by February 1?
Here's one of many possible actions:
Write the March 35 put (QQAOG) naked, get $13/share in cash now. Don't spend that cash :-)! As 3/20/98 approaches, the value of the option will converge on (35 - A), where A is the price of ASND; but not less than 0. If you are right, and ASND is over 30 by then, the option will be worth $5 at most (and perhaps 0, if ASND has broken 35). Buy the option back (assuming it's not worthless) with some of the cash you got for selling it in the first place. The rest of the cash is, as they say, yours to keep. Downside risk: if ASND is still below 22 come March, you will be buying the option back for more than you got for selling it (a loss); or you'll get assigned, and will end up owning more ASND stock. (You'd be buying ASND at 35, but applying the $13 you got, plus the interest it's been earning, to the purchase price, so it would really only cost you ca. $21 1/2 out of pocket.)
Various refinements allow you to reduce the downside risk at the expense of some potential gain. (E.g., you could buy the March 20 put for $2 1/2, limiting your downside risk to ca. $4 1/2.) |
