-OT- Jan, thanks for your kind words.
I have never had Intel. I dislike Intel and Microsoft for everything they stand for (no offense, unfair monopoly). I invested in AMD instead. I got out early last year while AMD got to mid 40s to preserve my 400% return on that investment. There is a small start-up HDTV company called Faroudja (FDJA) which one of my brother discovered recently. I am thinking about buying some FDJA shares. However, my buying rules dictate to consider only companies with at least 500 MM revenues.
A straddle is a position with the same amount of calls and puts at the same strike price and expiration. Any deviation from this is a biased straddle. Say, if we purchase 1 35 June call and 1 35 June put at a 5-dollar premium, the straddle becomes profitable only if Asnd is above 40 or below 30. The straddle loses time premium if the price fluctuates between 30 and 40. This is a very major risk if one doesn't know what he/she is doing (buy and hold, average down, etc.).
Since we know that Asnd is in an uptrend, and the chance of being above 40 by June is more likely than below 30, a biased straddle can be established by buying April puts (less expensive) and June calls instead. There is a good book on options strategies to enhance trading profits by Lawrence McMillan "Options as a strategic investment". A must read if you want to play options correctly. My biased straddle is really a "reverse hedge". Short positions with some April and lots of June calls. Call values appreciate about 50-65% of the stock price appreciation so you have to have more calls for the equivalent number of regular shares. April calls are for protection only, so if I short 1000 shares, I will have to have 10 April contracts. I avoid puts to save me the premium since I can use the cash to establish the short positions. If Asnd goes down, the short positions make money and do not expire (there are limited losses on June calls). If Asnd really goes up, the April calls protect your shorts (worst case, excersize the calls on expiration day) while the June calls make money. You need to update the straddle position in case of past week events (cover your short at 31 1/2) and uses the profit to establish 30 calls. You CANNOT LONG Asnd shares if you establish the straddle this way. The ideal situation occurs if you can short stock at price higher than your protective calls. If you are able to update the straddle position, you will make money if the price moves in either direction far enough (3-5 points). Good luck and Go ASND. |
