qwerty911,
Cute name .. you must type like me!
While not an expert by any means, I respectfully disagree with your "never buy back options" theory. I am sure you have made MUCH more than I with options, by the sounds of your experience.
However, I have done quite well with the exact scenario that Mr. Potter described. I have not done this with SFE, but have with CMGI and EGRP. Part of my thinking lies in the fact that I don't think this extreme high volatility can last forever, and eventually even a good stock will level out somewhat, and at that time I think you get the most value for the options, until the premiums begin reducing accordingly.
Understand though that I am looking at it from somewhat of a "risk averse" viewpoint. If I had more dollars in my "at risk" portfolio, I may indeed do the same as you. Also remember that in my case "at risk" just means I am not as astute in the market as some of you .. YET! :>)
Even if you have to buy back a call, your only "loss" is the profit lost between the strike price and the price of the stock at expiration, minus the premium received. At that point I usually rollout to another out-of-the-money call from 30 to 90 days out. I quite often do 60 or 90 days just for the added protection of a down market, knowing I may not profit as much as many of you. But I have been able to withstand several 10% to 20% corrections without decreasing the value of my original position.
JMHO. Any opinions welcomed!
Mike |
