For those of you who think AMAT is headed nowhere in the near future, and therefore plan to wait for lower prices, why not buy the stock and sell out of the money calls? If it makes a run sooner than expected, your stock will get called away at a small profit, which is better than having waited and missed it entirely. If it struggles, as expected, you can keep selling calls until you think it's ready to run, and then you already have the stock, at a lower basis than where you bought it, and you can buy back your calls, if necessary, to clear the road for the eventual runup.
Other than tying up your money in the purchase of the stock, are there any other disadvantages to such a strategy (assuming, again, you think the stock is going to flounder for awhile)?
Bob |
