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Technology Stocks : Dell Technologies Inc.
DELL 133.35+0.1%Nov 28 9:30 AM EST
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To: ViperChick Secret Agent 006.9 who wrote (74627)10/26/1998 6:54:00 PM
From: SkyDart  Read Replies (2) of 176387
 
Lisa and Option Traders: To sell a wasting asset or hold?

My preference is to create a vertical spread. For example, if you have a 41% gain on the 57.5 call and it sells now at 7 3/8, then if you hold and dell drops you could easily lose all your profit quickly. If you sell and dell continues to rally, you will not participate and will kick yourself. If you hold and dell stays in a trading range, you lose your profits as time passes due to time-premium loss.

So my preference would be to sell short the next higher strike call, ie the 60 at 6 points. You have created a money spread [AKA bull spread or vertical spread].

1). The effect is that you do not lose if dell stays the same because the time loss effects the cheaper short call more than the long call and you actually profit from a widened spread if dell remains at 62.5 until expiration.

2). If dell goes down, you lose very little because what you lose on the long call you almost completely make up on the short call. Your total risk is limited to your debit; here 1 3/8 or 137 dollars per spread. Much safer than risking you whole capital.

3]. The best part. If dell continues to rise, your spread widens up to a maximum of 2.5 points allowing you to make another 25% or so profit IN ADDITION to your 41%.

So when in doubt, spread!!

Good luck,

Jeff
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