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Strategies & Market Trends : Contrarian Investing -- Ignore unavailable to you. Want to Upgrade?

To: pcyhuang who wrote (412)	10/2/2006 10:29:05 AM
From: fedman	Read Replies (2) \| Respond to of 4080

I understand what you're saying, but in reality, what is the risk for a SBUX out of the money call. I mean, the stock has a 52 week high of lets say 40.00. It's trading and 30.00 and you think it's going lower because you see weak fundamentals. You write a 32.50 call for 2.50 for about 3 months out. There's no way I'm going to waste my money on a $40 call. What I do is if the stock gets to 32, I buy half the underlying. Then if it gets to 33, I buy the other half. Or I buy it out if it is near expiration. I especially like this strategy with ETFs, where you're not so much at the mercy of the news of one company. I mean, homebuilders can rally on some interest rate news, or housing start news. If that happens, I'll buy the underlying, if it gets taken out upon expiration, so be it. If the underlying falls back, then write calls again, this time covered. Fairly complex, and I think that your writing put strategy has a lot of merit in terms of ease and risk and return. But I'm a bit bearish overall and I'm trying to leverage off of it. I might buy a short index fund to reflect this sentiment, as I'm just experimenting with different ways to make money. Thanks for the warning and I'm glad you warned others as to the danger of uncovered call writing.