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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> materials from TheOptionClub should be considered a recommendation to buy or
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> in TheOptionClub have varying backgrounds and degrees of experience in
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> a student. As such, any information distributed through TheOptionClub
> should be considered with a critical mind and not relied upon as an
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ReplyDeleteHey, thanks for the information. your posts are informative and useful.
Indsil Hydro Power and Manganese Ltd