TO JACK AND ALAN,
Thanks for emailing me your questions... as I said in my response, I would rather keep things online. I think what we say can help others.
The main question was whether selling a certain ratio of IBM calls would hedge the potential weakness in INTC.
My response... for those of you who know me, I have one rule which I will paraphrase for this situation... You should never buy puts on a stock which is strongly bullish... in this case, both the 200 and 50 day moving averages are in strong uptrends. Now to me, selling calls is getting really near to buying puts... but as long as you have the calls covered, then it is a money - making method of hedging your risk. But the risk is only PARTIALLY hedged.
The only problem with selecting IBM is that I believe it will move much higher, albeit temporarily, before breaking down further. I show weekly sell signals and daily buy signals. It's a crap shoot.
Another approach is to ask the question... which risk do you want to avoid... the possibility of NOT making money in Intel? If the answer to this question is YES... then you may want to consider buying Intel calls with whatever strategy you adopt... like selling short against the box and buying calls...
SI posters, (this means YOU), please, hunker over to the new thread on the big Kahuna... to see my thoughts on a major market reversal.
Regards and good luck... it's a jungle out there,
Bill |
