The suspense may be over for me as I sold my put's for 13.85, paid 2.60 and now letting RIG stock price do what it may. I need about 62 to acheive the 75 I would have got by excercise. Stock currently 63. I'll let it ride with a stop loss around 62, unless we move up.
--- In OptionClub@yahoogroups.com, "mcatolico" <mcatolico@...> wrote:
>
> 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
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > > ------------------------------------
> > >
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> considered
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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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