I'd rather wait until after Valence announces a major contract and the stock moves sharply higher before starting to talk about managing gains , etc....
FWIW, I don't think options can be purchased on margin - they result in a direct hit to your SMA or buying power.
Also, when a stock is quite volatile, as VLNC has been, one can make a pretty good living with a buy/write program. I remember talking in August about buying the stock at $ 3.50 and writing the March 5 calls for about $ 1.00. Protection is down to $ 2.50 and gain, if called away, is $ 2.50 on a $ 3.50 investment in 6 months.
Same is true today: you can buy the stock at $ 10 or so, write the June 10 calls for $ 3.25, so your net investment today is around $ 7.00. If the stock is called away you have made $ 3.00 on a $ 7.00 investment, or 42% in 7 months.
Personally, I think the recent volatility in the stock has pushed the options to rather expensive premiums. I bought more stock outright today at $ 10 rather than buying any of the calls listed.
And, finally, if you think the stock is tremendously overvalued on a short term basis after a big runup, you can always write deep in-the-money calls on a relatively short time horizon against your long position, since these will deteriorate the most rapidly if the stock declines sharply... |
