Well, divvie, I don't think that you can get away from having to sell the old position, and buy the new. That's what I did. The way I look at it, I started with say $100 invested, sold for $250, then reinvested $100-$250 on a new contract. I keep rolling my capital forward, taking a gain, and paying a commission.
First, I'm interested in maintaining the full number of shares (leveraged in options, 3,000 in this case). Then I look at what kind of in-the-money strikes are available and affordable to buy 30 contracts after I sold 30. I don't sell until I've replaced, or at the same time I replace. This means that my gains on the whole thing basically keep rolling forward until I've cashed out. I don't look at each position to determine profitability in the end, but rather how much more do I have after I've cashed out, then when I started the process.
You might ask why I didn't buy the Septembers to begin with. I couldn't get deep enough into the money on Septembers, and afford it, to feel comfortable with the safety of my capital (pre-earnings). So, I bought August 100s. I have all of the run-up that the Septembers have had (being in-the-money to start with), and not as much downside risk. In other words, do you buy the August 100s at 7 or the September 100s at 12 prior to earnings even being released? I risked $21,000 up front, instead of $36,000. Got all of the gains to-date, while being able to hold my finger to the wind before jumping on the Septembers.
Overall, this is not my central investment strategy. The bulk of my DELL position is in-the-money LEAPS (Jan 2000 and 2001), and actual shares. But I like to have fun with it, making $30,000 to $75,000 when I play the splits (historically).
Regards,
LoD |
