Diamond
Here is my WMT Position:
Long 15 Sep 60 Puts
Long 30 Sep 55 Puts
Long 500 Shares Stock (bought at 60)
Without the stock, I had a great position should the stock decline, but would be hurting if the stock rebounded or just hung around 60-61 until expiration on 9/18, as these puts would turn worthless.
With the stock, I will still profit if the stock declines (its as if I have sold off 5 of the 60 puts for zero dollars). In addition, if the stock drops to 55, I can substitute 5 of the 55s puts for the 60s in hedging the stock; should the stock then rebound from 55 to 60, the stock should appreciate 5 points while 5 at-the-money 55 puts would expire worthless.
With the stock, I can catch some of any rebound above 60. This is tricky and I have screwed it up many times, but lately I have been shooting myself in the foot less frequently <G>. (Some of the TA,Mo-Mo,Slo-Mo,Mojo is sinking in here<G>). And, if the screwy stock (and the general market) really start to rally (I know LT, this is impossible!!), I have somewhat protected my position.
With the above position, I lay out a plan as to what I would do at various price levels. Some targets are fairly firm - for instance, as WMT falls into the 55-56 range, I will be selling the 60 puts, and probably buy more stock - perhaps run 1,000 or 1,200 shares against 30 Sep 55 puts. For selling the 60s, I would use limit orders - say, sell 5 at 4.5, 5 at 5.5 and 5 at 6.5.
I know this is a long jumbled post, but hey, its friday:))))
Mike |
