cereberus: re: LEAPs:
Tito and I have posted a number of long discussions on this topic. This was a while ago, and I don't remember the # of the posts.
Basically, my strategy is:
1. only use money I can afford to lose.
2. only buy LEAPs in blue chip/gorilla/best-in-the-world-at-what-they-do/long-and-successfull-track-record companies.
3. buy on value/GARP (not momentum) criteria.
4. buy the longest-term LEAPs available, preferably soon after they come out. This mitigates the time-risk, giving more room for error in timing. For example, I bought ZNLAT (1/2001 INTC 100s) a few days before INTC announced the Merced delay. If I had bought 1999 or 2000 LEAPs, that would have been a more serious mistake. As it is, I just bought more of them when they got cheaper.
5. Choose a strike price you're sure will be well in-the-money by expiration. "Maybe" isn't good enough.
6. Hold till you have long-term capital gains. Sell in increments when the stock becomes overvalued. The overvaluation indications should have been decided far in advance. Write them down and stick to them. For AMAT, P/S=3.5-4.0 and above is overvalued. Alternately, exchange them for stock just before expiration, if you want them to be a really long-term holding.
7. I'll buy a lot of ZPJAH at some point (1/2001 AMAT 40s), unless the downturn lasts till the 2002 LEAPs come out.
8. Another interesting choice is the CYMI convertible bonds. They function as 2004 LEAPs, and the underlying stock is bouncing on its 52W low.
Now, you have to tell me what Cereberus means. |
