There is no more risk if you sell calls equivalent to your 200 shares (i.e.
sell two calls). The "worst" case is somehow rig shoots well above 75; at
that point you would have your stock called away (at 75) and you just keep
the small premium that you sold the calls for.
-----Original Message-----
From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On
Behalf Of chickbull
Sent: Monday, May 24, 2010 8:11 AM
To: OptionClub@yahoogroups.com
Subject: Re: [TheOptionClub.com] RIG Trade
Interesting idea and I'd consider it if I had more shares. Is there any more
risk selling the calls other than waiting till expiration?
--- In OptionClub@yahoogroups.com, "mcatolico" <mcatolico@...> wrote:
>
> There is a fifth scenario which I would recommend.
>
> The first thing I always look at in these "married put" scenarios is what
> the corresponding call is selling at. On Friday the june 75 call was bid
at
> around $0.27 so if you do anything here you are basically giving away that
> $0.27. you are completely hedged here so another alternative is for you to
> sell the covered call for that $0.27 and just wait until june expiration.
At
> that point you can change your mind about things or just let the options
all
> be exercised and you would then net the difference between your original
> cost basis and $72.40 (or $72.67 if you also sell the calls here).
>
> My guess is that your net cost basis really should be the determining
factor
> here.
>
> Your cost basis should be whatever you paid for RIG less the cost of the
put
> (when you paid $2.60). so say your original cost basis is something like
> $50. If you exercise your puts (which is the same time as simultaneously
> closing the puts and liquidating your stock) the sale price will be $72.40
> (the 75 strike less the put debit paid). So in this example you net $22.40
> of which you'd then have long term capital gain consequences. However if
> you also sell those 75 calls you would net the extra $0.27 as well.
>
>
> So as to your scenarios:
>
> - Scenario #1 is safe but it relinquishes the $0.27 call that you could
sell
>
> - #2 would be very risky because if RIG rallies all the value of your puts
> would quickly evaporate. You'd be much better liquidating and buying
cheaper
> puts closer to the money and/or of longer duration if you still want to
play
> the downside
>
> - #3 is essentially the same as #2 with the risk being that RIG continues
to
> fall and your hedge would be gone; in this case just buy a cheap call
nearer
> to the money and/or out in time
>
> - #4 makes no sense since you would be giving the market maker the value
of
> the 75 call for free and probably be paying the extra bid/ask spread to
> execute it.
>
> As I suggest, if these are your scenarios, I would go with my #5 (sell the
> june 75 calls twice) and then if you want to play direction on the stock
buy
> either some cheaper puts or calls
>
>
> -----Original Message-----
> From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On
> Behalf Of chickbull
> Sent: Sunday, May 23, 2010 9:59 AM
> To: OptionClub@yahoogroups.com
> Subject: Re: [TheOptionClub.com] RIG Trade
>
> These are what I can do in my IRA. I have no idea waht your idea requires.
> Of course I can research it.
> "create a put condor, which would be basically a free trade, then wait
till
> expiration with possibility to make more $$$."
>
> Level Allows you to place
> 0 Covered Calls
> Covered Puts
> Buy-Writes
> Unwinds
> Covered Roll-outs
> 1 All of Level 0 plus:
> Long Calls
> Long Puts
> Long Straddles
> Long Combinations
> Long Strangles
> Cash Secured Equity Puts
>
>
>
>
>
>
> --- In OptionClub@yahoogroups.com, rvd <rvdidit@> wrote:
> >
> > I had RIG also, but I just sold it.
> > It had a profit but it was an underperformer compared to all the hype of
> what a great stock it was.
> >
> > If your Shwab commissions on options are low, you could put on a ratio
> > and create a put condor, which would be basically a free trade, then
wait
> till expiration with possibility to make more $$$.
> >
> > Ross
> > --- On Sat, 5/22/10, chickbull <rdconsulter@> wrote:
> >
> > From: chickbull <rdconsulter@>
> > Subject: [TheOptionClub.com] RIG Trade
> > To: OptionClub@yahoogroups.com
> > Date: Saturday, May 22, 2010, 9:00 AM
> >
> > New to this board and I have only traded covered calls and protective
puts
> on ocassion. You would consider me a beginner although age 76 retired and
in
> the market over 45 years. My accounts are at schwab and have Level 1
option
> trading. I'm sure I can learn something from you all and hopefully give
> something back. Here's a trade I'd appreciate any comments on.
> >
> > I have owned in my IRA, Transocean -RIG for several years and before
that
> Global Marine for many years, which merged with RIG and how I ended up
with
> RIG. Of course, everybody knows RIG now with the mess created in GOM.
> >
> > I bought 2 june 75 put contracts on my long RIG 200 shares. The puts are
> worth $15.95 each now. The stock is at $59.24. I bought the puts at 2.60.
So
> my choices are:
> >
> > 1. Hold till expiration and excercise for $75 at expiration.
> > 2. Sell only the stock now and continue to hold puts for futher
> appreciation or depeciation.
> > 3. Sell only the puts now and hold the stock.
> > 4. Sell both stock and puts now.
> >
> > With so much volatility and uncertsinty and having a more conservative
> approach, I'm inclined to do #4 and take the $75 now.
> >
> > What do you all think?
> > Regards,
> >
> > Ron
> >
> >
> >
> >
> >
> >
> >
> > ------------------------------------
> >
> > The goal of TheOptionClub is to provide a forum for members to work
> together for the purpose of furthering our individual understanding option
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>
>
> ------------------------------------
>
> The goal of TheOptionClub is to provide a forum for members to work
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> for the purpose of furthering our individual understanding option trading.
> All messages and postings, and any materials circulated are provided for
> discussion and educational purposes only. No statement contained in any
> materials from TheOptionClub should be considered a recommendation to buy
or
> sell a security or to provide investment, legal or tax advice. All
> investors are encouraged to consult a qualified professional before
trading
> in any security. Stock and option trading involves risk and is not
suitable
> for most people. There is no guarantee that any information provided is
> accurate and, may in fact, be wrong. It is understood that the
participants
> in TheOptionClub have varying backgrounds and degrees of experience in
> option trading, and that regardless of experience each member is
considered
> a student. As such, any information distributed through TheOptionClub
> should be considered with a critical mind and not relied upon as an
> authoritative source.
>
> To unsubscribe from TheOptionClub, send an email to:
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------------------------------------
The goal of TheOptionClub is to provide a forum for members to work together
for the purpose of furthering our individual understanding option trading.
All messages and postings, and any materials circulated are provided for
discussion and educational purposes only. No statement contained in any
materials from TheOptionClub should be considered a recommendation to buy or
sell a security or to provide investment, legal or tax advice. All
investors are encouraged to consult a qualified professional before trading
in any security. Stock and option trading involves risk and is not suitable
for most people. There is no guarantee that any information provided is
accurate and, may in fact, be wrong. It is understood that the participants
in TheOptionClub have varying backgrounds and degrees of experience in
option trading, and that regardless of experience each member is considered
a student. As such, any information distributed through TheOptionClub
should be considered with a critical mind and not relied upon as an
authoritative source.
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