John R. Conway's  Instablog

John R. Conway
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I currently work full-time as a chef and enjoy investing in the day time. I am a graduate of the University of Missouri-Saint Louis and reside in Saint Louis. I enjoy trading stocks and options and prefer to use deep in the money calls as a stock replacement strategy. When I am not investing I... More
  • A 1 Month Review Of The Deep In The Money Strategy 0 comments
    Mar 16, 2012 1:46 PM | about stocks: BAC, AA, MSFT

    The Deep in the Money strategy is my favorite strategy that I enjoy using when trading the markets. There are other strategies that I employ depending on how the markets are trading, but I prefer to stick with what has been working. In my last instablog post I gave you 3 hypothetical portfolio trades that I was considering and an easy way to use options on them. These were all bought on 2/7/2012 and lets review:

    Alcoa (NYSE:AA) Bought 2 April 12 calls @ 2.76 now going for 2.60

    This is still going for a loss, but have made some of the money back. One thing to note about Alcoa is that you have to be prepared to average cost down (double down) when the stock slips. Alcoa has a high beta and sometimes can trade up/down more than 1%. i clearly got into the stock at the wrong point and should of waited for a pullback. i have been advocating for a while to buy Alcoa under 10 and so far anyone buying shares or calls of Alcoa should have been profitable if you bought this under $10. Let this be a lesson to anyone who is thinking about buying Alcoa, wait for a pullback and be prepared to buy more if you are bullish.

    Bank Of America (NYSE:BAC) Bought 2 April 12 5.5 calls @ 2.48 now going for 4.10

    These calls have almost doubled in a little over a month. I still like Bank of America and from 2/6 to about 3/5 the stock was mostly flat and provided a safe opportunity for investment. The obvious catalyst was the bank stress test and that led shares higher. With these calls almost doubling its now time to take profits or rollover.

    Microsoft (NASDAQ:MSFT) Bought 2 April 12 28 calls for 2.62 now going for 4.82

    Tech has been a nice performer for the start of 2012. I like Microsoft as a solid play in tech looking forward. The stock could pullback, this stock isn't as volatile or has the beta as some of the other high flyer stocks in this sector. I believe there is still some more gas left in the tank in MSFT.

    If one has followed recommendations on the portfolio you would have spent a total of $1,572 and made a profit of $732. This isn't bad for about 1 month of gains. Since April is expiration, I will be closing out these positions and looking forward to trading some different stocks in the hypothetical portfolio. Look for more deep in the money picks to come soon. Thanks for reading and Good Luck!

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

    Stocks: BAC, AA, MSFT
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