Guys, thanks for the nice remarks. This is a great thread, and for sure, emc is in for a much tougher go of it in 99 than previously. I agree with whoever said that 150 is definitely the max for the time being. I see anything above that as ultimately unsustainable. Of course, supposedly near the end of a bubble (think Japan circa the late 80's) prices can explode exponentially. If emc does explode past 150 anytime soon, I will take that as a sure sign that the end of the bull run is near and plan appropriately. And yes I will even try to break my stream of consciousness thoughts into paragraphs- good suggestion 8^).
I expect the overpriced premiums on emc, just like those on dell, to last at least throughout this year, and likely even thru next year. Look at dell for the past couple of months. It's basically gone nowhere fast, so anyone who sold covered calls is raking in a nice steady income. That's definitely the way to play dell and emc and probably msft as well IMO. I see emc going to 130 over the summer but no higher. I predict we will close no higher than 115 for may expirations. Unfortunately my timing has been lousy and I didn't get the covered calls sold last week when we were at 117. That would have been great. I don't know if I will get another chance this week to do it. My general idea is to sell the closest in month if at all possible. Thus I am still trying to unload the May calls. Next week is probably the last possible time to do so. I may have to go out to June instead but I would like to avoid that because I think the upcoming split will bring the daytraders out into emc and we should get a nice surge before the split if the market isn't completely tanking (which I regard as very possible. Looking at the historical p/e's since last October compared with the previous years has definitely scared me a bit).
Up till now I mainly played options (without stocks) so I'm somewhat new at the covered call game myself. I don't believe we will see anymore 30 point moves without pullbacks in '99 like we did last year, so I believe in selling quite tight covered calls. Just give emc some room to run in the month before earnings, which we know are always great. I may try to even sort of daytrade/swingtrade the covered calls, i.e. buying and selling them repeatedly as emc swings up and down. Certainly that would have been a great strategy to use in the last 30 days. I need to generate some income off this investment so I may be in a different boat from many of you long time holders. I know that I would have been better off last year just buying the stock instead of my options (though I did really great on those options I did get hit by uncle sam for it, which you stock holders managed to avoid largely). But I see no more than a 30-40% stock appreciation this year and I plan on at least doubling that return by playing the covered call game.
At some point the manipulators who control the prices on options may try to stop the game by making options on emc dirt cheap. They did that last year on msft almost exactly a year ago when the trial first began. My interpretation is that a lot of stock holders must have decided to sell covered calls for some protection so the manipulators decided to rip off those people by virtually giving away the options for free. I bought msft calls I think 2 or 3 months out for pennies literally. It turned into my greatest gain ever, 6 figures on a few thousands dollars investment. So if the manipulators do the same on emc (which is quite conceivable at some point if enough people start to sell covered calls) that will be the time to load the boat on the calls. I may have to dump the stock to buy the calls in that case.
In short, I'm learning as I go on this covered call game. I just hope my education isn't as expensive as it usually has been in the past. My favorite play has always been diagonal spreads and the covered call strategy can be considered a variation of that play. My best advice is go back and study how one should have played the dell covered call game for april and may say. emc will grow a little better than dell, but I think the strategy is basically the same. The only thing I'm not sure on is whether it's better to sell the closest month or the next closest month as the premium on the next closest month is a lot more attractive. I see that as the big question personally. And 135 and 150 are going to be really tough resistances to overcome IMO, so they are easy targets for calls when we get there. |
