Dan,
I'm going to be getting a large chunk of money soon, and may well invest in myTrack. Trying to roll and sell part of my position while the stock was in the grips of daytraders wasn't easy; I got slightly whipsawed. I did OK, but could have done better. Of course, if I had the balls to let the stock go naked for half the day as you suggest with 20-20 hindsight, I could have made tons.
Here is what happened. Nut at beginning of day $8.46/share
Buy 2 May 10s @ 5 1/2. Sell 200 shares at 14 1/2. After commissions I made a whole $100 on this. Sigh. Well, it's still enough to pay the bills I had in mind for a couple of months. I got a little greedy and hoped for a little bounce in the stock after I bought back the calls. Didn't happen, of course, and I chased it down a little instead.
I did better on the roll because I didn't dare get that greedy on the main position: Buy 8 May 10s @ 5 1/2. Sell 8 June 12.5s @ 4 1/4. Thus the nut goes up $1.25/share to ~$9.75/share. Return if exercised now (12.5-9.75)/9.75 = 28% Stock was at 15 when the new write was executed, so downside protection was (15-9.75)/9.75 = 53%.
Not as good as I'd hoped, but 28% for two months (more like 40% with margin) I will take, and I'm happy with the risk/reward ratio still. With the $150K soon to come into my trading account, I think I will be much more conservative. I'm not even going to try to roll up on such a stock. Still using a bit of margin, I can get 15%/month on this kind of stock with one transaction. Good enough for me!
I've got to ask AmeriTrade and Dreyfuss if one can specify a spread on a roll, as one can -- for a price -- on a buy-write. Boy, would that be worth a high commission.
I'm a little hypertensive, and playing with the daytraders is not good for my health in the long run. How did you stand it? It was fun today but also terrifying. I couldn't do this every day with a lot at stake. It would be like free soloing every time I went climbing. Going to call AmeriTrade and ask them to cut me the check. That'll calm me down a little.
It should be a couple of days, at least, before I feel the need to trade this again. As I write, the stock is at 14, so at least my theory was reasonable. I just need to learn how to more safely take advantage of my correct hunches.
Good going on your paper trade! You're clearly a lot better at the actual trading than I.
Cheers, Tuck |
