Herm,
Just an update on my FORE-play. The way I play a position is to take a decent profit when it presents itself, which is why I closed out my FORE position yesterday. I saw the opportunity to make as much profit as the position would have made at expiration, in only 1 week instead of 4.
The entry position was:
400 shares FORE 10 7/16
Sell 4 Nov 10 Calls at 2
Buy 8 Nov 7 1/2 Puts at 3/8 (to protect the downside when earnings were reported, in case it dumped.)
If the stock stayed where it was, or went up, the net profit on Nov. 20 would have been 13/16. If the stock dropped, I'd have the $2 from the calls, plus the puts would go up, keeping the long position essentially neutral (I bought twice as many puts as I had shares).
Since the stock rose dramatically within a few days, I reevaluated the position. I covered the short calls at 5 1/2, for a -3 1/2 loss, but sold the long shares for 15 3/8, for a 4 15/16 gain. I still have the Puts in case the price falls back down, but even if they expire worthless, I've made a decent profit (percentage-wise) in a week instead of a month, and I can move into the next position much sooner.
Take the small profits - Pigs get fat, Hogs get slaughtered.
Scott |
