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Politics : Ask Michael Burke
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To: Kathleen capps who wrote (32262)9/4/1998 6:41:00 PM
From: yard_man  Read Replies (1) of 132070
 
Rolling down -- buying puts at a lower strike with more time -- after the first set of puts have appreciated several times over allows you to keep profits and risk much less money (just some of your existing profits) while still participating in further drops if they come. I seem to remember MB saying that he rolled down quadruple or betters when it is getting within a month or so of expiration.

Good idea to roll down whenever you have a very large 5X - 10X profit, because you lock it in. It is a conservative approach in that you might make more money if the stock keeps on declining had you held the original puts, but that's taking a risk.

He probably paid 3 - 5 points for puts that are now trading at 20. If he sells and puts that same amount back in. He still retains a hefty profit and give himself more time for the stock to continue to fall.
He sacrifice a little profit for lot's more time -- good exchange, no?
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