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George Acs  

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  • Playing Leapfrog With Molycorp [View article]
    While none of the suppositions you make are part of the strategy presented in this paper, the math is correct, because you do not lose the premium.

    If you sold puts and were completely passive and exercised no management at all of the position if the price finished below the strike level you would be obligated to pay that amount per share to the holder of the options contract.

    Of course, even if you did actively manage the position your absolute risk potential would be that shares became completely worthless, yet you are still obligated to pay $5 for them.

    WHether worthless or otherwise, if the options are exercised you would then take ownership of shares, with your cost basis being adjusted to reflect the premium you received. When looking at your account you would see a cost basis of $4.40, in this example.

    Once you own the shares you can elect to sell calls against them and collect a premium. In this case, if you used a $5 strike level to sell call contracts, you would be obligated to turn your shares over to the contract holder if shares closed above $5 at expiration, or even sooner if the price was significantly above the strike level.

    In the strategy presented here there is the need for active management of the position because one of the goals is to avoid taking ownership of shares. That is usually done by closing the existing position and replacing it with a new one, that will provide its own premium to the seller and expire at some time into the future.
    Apr 9, 2014. 05:32 PM | 1 Like Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    While none of the suppos
    Apr 9, 2014. 05:20 PM | Likes Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    Thank you.

    Like so many things, it's sometimes unfortunate how late in life you are able to actually appreciate what has always been there right in front of you.

    The nice thing about options is that only the imagination limits the applications and for the seller they can be such a powerful tool for income generation or portfolio protection, just as for the buyer they can be a powerful tool for sucking your assets away in the hopes of leveraging them.
    Apr 9, 2014. 02:25 PM | 1 Like Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    Since this is a site that tends to focus on stock related issues, you might understand why someone would interpret "collar" to mean "collar," especially when used in a context that suggested a "collar"

    While the ITM put premiums may be "massive" for the stocks that you follow, that just re-inforces why it is so often mostly in the interests of the seller to engage in the option transaction. As a seller I like it when those premiums evaporate on puts that I have sold.

    You are missing something very critical in this discussion and in the strategy presented in the article.

    I am the seller. As a seller of options I collect the premium. More is better, in such cases. The only purchases of put contracts are to offset or close (or rollover) a contract sold. They are not made in isolation. They are made either to secure profit or to continue its propagation.

    The premium received for then subsequently selling a new contract for a future date is additive to the accrued premium revenues and should represent another "net credit" that gets added to your income stream.

    Remember, you are the counter-party in this strategy. You sell what you don't own and just keep selling it and selling it.
    Apr 9, 2014. 02:08 PM | 3 Likes Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    You must be pulling an Al Sharpton like undercover job on me, because I've got jelly beans going as I type my response. Absolutely, the sugar high is keeping me awake this afternoon.

    You're right about those declining premiums. I'm no longer a big fan of time passing in general, but when it comes to those options, as the "counter-party," I've got to love them getting older
    Apr 9, 2014. 01:53 PM | 1 Like Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    By the way, I am the counter-party that you refer to. I am the seller of options. I keep the premiums. I also write the songs that make the whole world sing.
    Apr 9, 2014. 01:27 PM | 1 Like Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    You're absolutely right. I should have mentioned that you have to be willing to own shares as a general rule when selling puts. In this case, part of the list of goals is to avoid ownership, but it is a possibility, especially if someone decides to exercise early. That's one of the reasons I like to make moves upon large price swings, especially downward, so as to avoid that possibility.
    Apr 9, 2014. 01:15 PM | Likes Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    The individual investor can decide what stocks to use with any strategy. Any one can cherry pick to "prove" or "disprove" a strategy.

    However, your approach is somewhat novel as you focus on a strategy that isn't remotely being discussed in this article.

    Lest the confusion continue, the strategy discussed in this article is not a "collar," unless you are using a provisionally unique definition of the term. There is no long position. There are also no call options involved. In addition, instead of using out of the money puts, you may have noted that I specifically stated that my preference is through the use of in the money puts. Further, those are sold, not purchased.

    As such, none of the three legs of a collar are included in this strategy. Perhaps you were thinking of a different article?
    Apr 9, 2014. 12:40 PM | 1 Like Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    Or you could just get Option to Profit, although my own use of puts has significantly changed over the years since that was written.

    I am a relatively simplistic devotee of options and stay away from the more complex strategies, but occasionally like doing something that is a little off the beaten path.

    I should have mentioned, as you did in your comment, that "covered" puts is the way to go if you want to be consistent with a conservatively cautious strategy.
    Apr 9, 2014. 12:26 PM | Likes Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    You may have noticed that I never said anything about the merits of the company. This is simply about trading a stock based on the criteria mentioned in the article. The ticker symbol is irrelevant. What is relevant is that its price moves and does so on a very regular basis, while offering reward. The longer the leapfrogging game can continue the easier it is to eliminate risk as premiums accrue.
    Apr 9, 2014. 12:22 PM | 1 Like Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    There is no question that fees can eat your profits. My assumption is that most people who trade with some frequency do so with discount brokerage firms and may also do so in some volume.

    Back in the days that I first considered using a covered option strategy the costs were prohibitive even for simple stock buys. You needed a 10% gain just to cover the commission costs of entry and exit on a couple of hundred shares of a $20 stock.

    For many, it's a little different these days. Perhaps I should say that it's a lot different these days.

    So if you take that factor out of the equation, as you should for most others than yourself, your remaining conclusions are still erroneous.

    With each week the "danger" or as i refer to it, the liability falls, as premiums accrue. The use of rollover trades, which are quite inexpensive to execute, delays or can eliminate assignment while continuing to generate new premium income.

    In fact, being rangebound is by far the most desirable of all conditions and is extremely rewarding. It is also far less risky than trying to call a direction. The strategy described above is really agnostic as to direction. It just depends on periodically alternating movements, which is what most stocks do during most of their life spans.
    Apr 9, 2014. 12:18 PM | 1 Like Like |Link to Comment
  • Playing Leapfrog With Molycorp [View article]
    I tried to sell puts on GILD yesterday for personal account, but couldn't get my price, as I was a little too late and shares started their recovery right after placing my weekly bid at $0.59 for the weekly $67.50.
    Apr 9, 2014. 12:08 PM | Likes Like |Link to Comment
  • In Like A Lamb And Out Like A Lion [View article]
    The OTP COach shares went down to the wire. I was hoping for their expiration, but in the final hour shares got to $49.51 and I usually try to make trades by 3:30 PM, so I was prepared for a rollover, but hoping otherwise. SHares then picked up a few cents, enough to cross fingers and wait.

    The last TMUS position I had was assigned on 3/22, but I continue to watch shares for a possible new entry point.

    Yesterday was an interesting day as the follow through market decline saw significant price turnarounds in both T and VZ which were ex-dividend the next day (today). They both rallied significantly from their lows as there was clear rotation into perceived safety and high yielders.

    TMUS, on the other hand, suffered along with the rest of the market.
    Apr 8, 2014. 08:17 AM | Likes Like |Link to Comment
  • In Like A Lamb And Out Like A Lion [View article]
    It only matters how they make their money when someone in a position to do something about it does so.

    To quote myself from last week's mention of Apollo (and particularly to the final closing sentiment):

    "Finally, while so much attention is being focused on Herbalife (HLF), it seems that the real shame should be heaped on the private education group. Whether looking at their graduation rates, student loan defaults or other measures, one has to wonder about their rightful place in society, as long as some deference is given to the occasional successful graduate who can be identified on the basis of appearing in a television commercial touting the wonders of the particular educational model offered by Apollo and others.

    But, as with any disdain I may have for smoking, that doesn't mean that trying to exploit the stock is above me....."
    Apr 6, 2014. 05:34 PM | Likes Like |Link to Comment
  • In Like A Lamb And Out Like A Lion [View article]
    My first visit to Buffalo was in mid-November 1975 and it was about 80 degrees. I remember thinking "this doesn't look like a bad place to spend 4 years."

    It took me nearly 40 years later to realize that I had also dodged a bullet by not going to Binghamton, NY for college, having just visited there for the first time this Thanksgiving to be with my son's future in-laws

    Ultimately, I survived Boston winters instead including the blizzards of 1978. No matter how bad those may have been, infinitely better than what could have been, as my native Buffalonian brother-in-law can attest.
    Apr 6, 2014. 04:50 PM | Likes Like |Link to Comment
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