Just pointing out that there is an alternative to shorting, namely
selling calls.
Similarly it could be pointed out that there is an alternative to
investing long-term in proven, blue-chip winners, namely letting it
all ride on TokyoMex's pick of the week. That does not make it a good
idea.
Then I asked:
Why would you ever prefer that to buying puts?
The goal of the month to month is positioning for a likelihood of
realizing $5-20K in premiums by going naked up to 20 out of the money
November calls.
The premiums being so high on AMZN it's hard to come up with a numerical demonstration of the relative risk you are running. Still, If AMZN runs up 50 points in the next two weeks then you've basically wiped yourself out going for a $10K nugget. Impossible, you say, but then again, AMZN's entire run this year has been "impossible".
Meanwhile, if AMZN does collapse by 50 points, so what? All you get is your $10K, same as if AMZN stayed the same. Assuming shorting to be out of the question, only the put buyers would reap that reward.
Here's a less diplomatic version of the above, written mostly about puts but applying equally to calls:
archive.thestreet.com |
