Monday, November 2, 2009

Re: [TheOptionClub.com] Risk Free Position in XOM

 

Hi RFH, you are surely in an interesting position - here are some thoughts...

With long stock and long put, you are in a synthetic long call position. Once you realize this, the next thing to do is to look for ways to lock-in gains on the synthetic long call.

Sell Dec 75 call @ 1.14/1.16 - of course you may get called if XOM is above 75 at Dec expiration but you will end up selling at 75 which is way above your purchase price... if called, you can sell the put to wind up the entire position at whatever price it is trading at that point... if you don't get called at Dec expiration, you can keep selling OTM call every month (up-to Apr) until you actually get called...

Sell Dec 75/80 or 80/85 call vertical. For your short vertical to lose money, XOM will need to go above 75 or 80 depending on which one you choose. If that happens, you will make nice money on your stock.

Sell -2 75 C / +1 80 C ratio. One of the short calls is covered by the long option. The other short call is covered by your long stock.

Sell 70 Dec put against long 75 put to generate some additional income from put side. Of course, if XOM tanks, you will have partial protection until Dec expiration.

Sell 70 Dec Put and Dec 75 Call. Only one of them can go in-the-money at Dec expiration.

There are many more possibilities but I hope I have got you thinking:-)

Cheers Vikas





On Mon, Nov 2, 2009 at 3:54 PM, drrobhansen <robhansen5252@hotmail.com> wrote:
 

In late September I took a position in Exxon buying stock at $69.14. When earnings were about to come out, I wanted to protect myself against a downtrend in the oils, so I purchased the April 75 puts for $5.30. So the cost of the entire position is $74.44 and I'm protected until next April at $75.00. Right now I am ahead on the stock $2.53 and ahead on the put $1.95. My question is: Are there any positions I can take at this time to lock in some decent gains while at the same time leaving myself open for more upside if oil decides to skyrocket sometime before next April. I don't want to get called away any time soon. How should I be playing this unusual (for me) situation?

Thanks,
RFH


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