Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Umunhum who wrote (44385)	5/26/2005 1:24:31 PM
From: kodiak_bull	Read Replies (1) \| Respond to of 206338

uhm, Interesting strategy. You are bullish on the stock short term (hence the short put position) and you are using those proceeds to finance a long term bullish position (long 07 calls). So this position reflects a double bullish view. As I look at the risk curve on this one, you are most at risk if XLE goes bearish rather than bullish here, and a significant drop will mean significant pain. With 51 days to go until the short put position expires, if you stay here at $41-ish you will show a small loss (but still own the long dated calls. A drop in price would give you: XLE Price Gain/Loss 43 +7050 42 +3150 41 -650 40 -4250 39 -7850 38 -11,350 37 -14,750 As an alternative financing vehicle to purchase the 07 calls, you might think of [-20 Jul 41 calls; +20 Jan 07 44 calls]. Your breakevens are about 37.65 on the downside and 42.55 on the upside, with the sweetspot of profitability at 41.00. What's more if the XLE trades back and forth between 39 and 42, you'll be able to buy back the shorts and resell once or twice before July expiry. Thanks for bringing up your strategy--these are interesting times as energy fights it out as to whether it's going to be bullish or bearish. Kb