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

To: Paul Senior who wrote (29991)	2/6/2008 5:21:53 PM
From: E_K_S	Respond to of 78525

Hi Paul - I added another 1/3 to Companhia Paranaense de Energia (ELP) by selling a few March $15 naked Puts. My strategy is to have the stock Put to me in March if the stock closes below $15/share. The stock pays an annual dividend in April which should be between $0.40 - $0.60 per share. As you know I am bullish long term on ELP. This strategy allows me to reduce my current cost basis and/or add to my position and collect the annual dividend. ==================================================== For a few of my larger positions I am employing a modified "strangle" option strategy to take advantage of the recent market volatility. The strategy is to write twice the number of out of the money covered calls than out of the money naked Puts for a settlement date three to six months out. The strike prices are banded at 15% to 20% above and below the current stock price. When the options mature I am either forced to sell or buy shares of my hedged position if the stock price exceeds the banded strike price range (ie +/- 20%... sell if above or buy if below). If the stock price stays w/i this banded area, the options expire worthless and I collect the option premium. During this time, you also collect any dividends paid by the company. It may sound like a complicated strategy but it really is not. It is very difficult to trade these large swings and be correct both on the Buy and the Sell. This way I can lock in my long term gain and even buy more if there is a net 20% decline w/o having to time the market. I have been implementing this strategy on stocks that I feel are fairly valued at current levels but would buy more if the stocks trades 20% lower in price. Finally, using such a strategy you can trade around your position during the option period (covering Puts on rallies, covering the Calls on dips or adding or selling new shares). I have put strangles on both NYB and SFL that are good dividend contributors to my taxable portfolio. EKS

To: Paul Senior who wrote (29991)	6/25/2008 4:48:53 PM
From: E_K_S	Respond to of 78525

Hi Paul - Hedged a small portion of my ELP shares that are in my IRA by writing Jan 2009 $20 covered calls for $2.50. The company is near an all time high and has significantly outperformed the S&P 500. The recent break out in the stock price is on better than average volume which is bullish. finance.yahoo.com^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined The company pays an annual dividend each April, so by selling a few covered calls, I protect a portion of my 33% gain YTD. The $2.50 call price is a 12.5% premium to the current price. Brazil has recently raised their interest rates while the FED has left rates unchanged. I suspect the $/Real will continue to remain weak for the foreseeable future but once U.S. rates start to increase, it may impact the relative share price due to lower foreign currency gains. EKS