bearfund

The Cheesecake Factory: Have Your Cake and Eat It Too

Tell me Paul; is there a restaurant chain you don't like this strategy for? If I were as bullish as you are - and have been - on these stocks, I wouldn't bother with it; I'd just buy calls. Of course, I'd also have lost every dollar invested, which suggests that bullishness isn't justified. Someday you'll be right but it might be 50 years before these stocks regain the valuations they had when you first started pumping them. Or never.

The options strategy is not a bad one although as Moby points out writing naked puts ties up capital. Still, given the limited upside I have to be quite confident that the bottom is in and the company won't fail. Clearly you haven't done well on that score thus far. Might be a better play with a company like C that is for all practical purposes part of the federal government now. For example, buy C and write the 20 Jan'09 straddle, total cost $14.80. If the stock is lower than that you can bet all hell's broken loose so maybe pick up a GLD 100 call for $2.90 to complete the hedge. See, there, I'd feel pretty confident. CAKE ain't C though.