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Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: Cell Tower Jack who wrote (247)	12/8/1999 5:26:00 AM
From: Greg Higgins	Respond to of 355

Lee Meisenburg writes: Would appreciate you posting all your option moves ... Well surely not all, there isn't enough time. I will follow up on an earlier post: On May 21, I wrote: Feb 3, with the underlying XXX about 60 I buy the Jan 01 35 Strike and sell the Feb (99) 60 strike net debit 27 or so. Feb expiration, I buy the Feb 60 and sell the Mar 60 net credit 1 5/8. Mar expiration I buy the Mar 60 and sell the Apr 60 net credit 1 5/8. Apr expiration - the april calls expire. I place an order to sell May 60 at 2 1/8. It gets filled. May expiration - I buy the May 60 and sell the Jun 60 net credit 1 5/8. I put the order in Monday to make the trade, but I never quite get my price until thursday morning. I also bought more Jan 01 35 and sold the July 60 net debit 24 3/8. Four days later, May 25, in anticipation of picking up a few "extra" dollars, I buy back the short Jun position for a teenie less than 1/2 of what I had sold it for. Current position Long 6 leaps, Short 2 July 35 calls. Jun 6 Stock recoveries to the point where I should have sold the Jun 60s again, but I'm at a conference and miss it. The week of June Expiration The stock has traded down to 55, I'm reluctant to sell the 55 calls and the 60 calls aren't really worth the effort (I'm thinking). Still, if I let the opportunity go buy, I'll never crack the initial nut. So I sell 4 Jul 55 Calls, Sell 6 Jul 55 Puts and buy 6 Jul 50 Puts. The strategy is working perfectly all the way until the day of Jul expiration. Unfortunately for me, that's the only day I have to trade. July expiration I close out my 4 Short 55 Calls at a loss. I let my 55 Puts expire and my 2 Short 60 Calls I cover at 1/2. I sell 1/2 dozen Aug 60 calls. Aug 3 The stock has traded back down to 57 or so. I decide the stock won't break 50 and sell the Jan 50 puts for 2 3/16. (More on this later). August 5 The stock trades down abruptly to 54. I close out my Aug 60 calls at 1/4. During the next few weeks the stock sinks lower and then recovers and just rolls around the middle 50's or so. I'd sell the 55 calls but the memory of last month is still fresh and I'm hoping / expecting the stock will recover once August ends so I leave things be. Having gotten it set in my head that $50 is a floor for the stock on Sep 20 I sell the Oct 55 Put. Two days later it breaks $50. After minutes of excruciating thought, I close the position at 1 1/2 loss. The stock recovers to very low 50s. On Oct 3, it breaks 50 again. Recovers again. October Expiration Having plunged the past few days, the stock closes at 49. I have lost all faith in it and am looking to close out the position. Oct 28 Having spent the last week below 50 the stock gaps open and closes just over 54, sometime earlier that day I sell the Nov 55 calls for 1. Nov 18 Just prior to expiration, I close the calls for 3/16. Nov 19 I close out the Jan 50 Puts for a small ($1) profit. I close out my long LEAPS ending my play with XXX. Total Profits all positions this year: -199.93, not bad considering that I never should have sold the Oct 55 puts (losing $901), and probably shouldn't have sold the Jan 50 puts (gaining $411). Just today the stock closed at $48, reinforcing my decision to get out. The most undesirable characteristic of a CC (or in my case a Bull Call Spread) is a lack of predictability in the underlying stock. You need to have a certain amount of volatility in order to make the options premiums worth taking (observe, for instance, XLU -- with the underlying at 29 1/2 the Jan 29 call is only selling for 3/4, surely not volatile enough), but you need to have some faith that your profits will exceed your losses. Once I lose that faith in a stock, I get out.