Jay and Trisha,
My style is covered call writing. Stocks are simply vehicles by which I harvest time premium. If I can find a stock that has good fundamentals (going to be in business for a while, not poised for a major nose dive), but is very volatile, I am interested. At the time I had cash floating around, GCTI met those criteria as well as a very key short term criterion: the stock price must be very near an option strike price. The latter means the time premium of the call is at its largest relative to the price of the stock.
So . . . Since I do like GCTI intermediate term, since it's had it's major nose dive already, since it's remained volatile, I might stay with it if the price happens to be at a strike price this Friday. More likely, I will keep my eye on it and come back to it. Rolling up options is expensive in commissions and cash flow. I usually let myself get called out; my returns have simply been better that way.
I gather your cost basis is well above my 12 1/2? Regardless, I won't be surprised if this one runs for a while. However, I also wouldn't be surprised by some "buy on the rumor, sell on the news" retracement after earnings is announced. That is, I think a good quarter is being priced into the stock right now. An exceptional conference call or trouncing of EPS estimates might offset this. When this retracement seems to have run its course, I will be looking hard at buying this one again. Because you're right, Jay: it does seem to run up around earnings time, then tank. I looked at the two year chart like I said I would, and I see the pattern.
Anyhow, that's my approach and my opinion. Whew! It's about time to finish off my Calif. Tax return.
Thanks, and good luck to you both.
Cheers, Tuck |
