W. Edward Olmstead's  Instablog

W. Edward Olmstead
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Dr. W. Edward Olmstead (www.olmsteadoptions.com) currently serves as Chief Options Strategist at Olmstead Options Trading Strategies and is the author of "Options for the Beginner and Beyond," top-rated by customers on Amazon.com. From 2003 - 2007 he served as the original editor of... More
My company:
Dr. Olmstead's Options Trading Strategies
My blog:
Options for the Beginner and Beyond
My book:
Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks
  • To The Rescue - A No-Cost Option Strategy To Repair Or Enhance Stock Returns  0 comments
    Jun 27, 2012 8:00 AM | about stocks: FB, FCX, ARNA, VVUS

    Just a reminder for those who missed our discussion on Stock Enhancement/Stock Repair using options. It's a pretty nifty, no-cost (yes, really!) way to improve the return on a stock you already own or accelerate the recovery in value of a stock that has suffered a significant drawdown - especially timely given the market action lately.

    We use Facebook (NASDAQ:FB) and Freeport-McMoRan (NYSE:FCX) as our trading examples and outline a recovery strategy for those who may be underwater right now, but the strategy can be used to repair or enhance returns on any stock (take heed, holders of Arena (NASDAQ:ARNA) and Vivus (NASDAQ:VVUS), as you await your FDA decisions).

    This is an options strategy that can be implemented at no additional cost beyond the original expense stock ownership. It also has no margin requirement and hence can be done in a retirement account. This strategy can be viewed as an extension of the covered call concept, although the motivation and time frame for the trade are unlike that of the typical covered call.

    The same strategy can be used to accelerate the recovery in value of a stock that has suffered a significant drawdown. In this case the strategy is known as the stock repair strategy. Again, it is a no cost trade.

    Also, we did want to mention we offer a free 4-week trial to our Play of the Week service, with absolutely no obligation. The play is sent out every Tuesday morning long before the market opens.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: FB, FCX, ARNA, VVUS
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