Tuesday, July 28, 2009

RE: [TheOptionClub.com] Old Leaps What to do?

 

While trying to research what CSE means, I came across this article:
http://ezinearticles.com/comment.php?Compound-Stock-Earnings-A-Brief-Overview-and-Review-of-the-CSE-Options-Trading-Techniques&id=1318604

The commentator of the article said he lost money on CSE in current market condition. In my opinions, a straight covered-call-writing using stock is the same as "short naked put. And, covered-call using LEAP is like long-term calendar spread. Both short-naked-put and long-term-calendar require some "directional" interpretation on the market condition. I used to selling covered-call and made tons of money and thought I was a genius. But once I realized what I have been doing, I no longer doing CSE.

My suggestion is for you to realized what CSE really means. If you agree that CSE is actually a "somewhat" directional trade, you will have to understand your interpretation on GSE's direction. If you really believe it will go up for the next 3 months, keep your position. If you believe it will not go up that much, save youself some money by closing your postion now.

How about selling a lower-strike call for more credit? If you really have no idea where GSE is going, don't even think about sell a lower strike call like 12.5 or 15 for credit. A sudden jump on the stock will scare you to lose more money.

I know this is tough. You are not alone. I have many good lessons learned like this.
 
Eski


-----Original Message-----
From: robhansen5252@hotmail.com
Sent: Thu, 23 Jul 2009 05:27:29 -0000
To: optionclub@yahoogroups.com
Subject: [TheOptionClub.com] Old Leaps What to do?

 

I've been stuck with a leap position in GBX left over from the days I was experimenting with CSE techniques. I owned the stock, was selling calls against it, but then the stock just tanked. One of the CSE techniques of rescuing the trade involved exchanging the stock for a leap, and now I am stuck with 10 of the GBX Jan10_20calls. My cost basis is $8.84 and it is now at 0 bid, .30 ask. The leaps were purchased in March of '08. I haven't done anything with this position since last September except to watch theta eat away at it while the price of the stock continued to sink. Anyway, is there anything I can do with this position to maybe generate a pittance of income until it expires? Any ideas at all?

Thanks,
RFH

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