Current positions

I have a number of positions in play right now, sold one for just over a 30% gain, not bad for a week and change, another for 3.1%. I consider those not bad for the timeframe involved.


I added two more today, one I have held before as a stock I now bought the call option, AEO and a new one, COP. Both have been on my main list. COP was to be a short play but the downtrend line was broken and may become support so I entered an call option trade for a higher price than I might normally.

I have been introduced to an option trade that I really like but cannot yet take advantage of due to capital requirements (multiple small account syndrome). I'm not certain what it is called but the idea is to buy the call option at the money or the next out of the money for the bullish play, this can be done on it's own but I would rather buy in the money calls if that were the case.

The second trade is to sell the next strike or two out of the money put. The idea is that the price is expected to go up therefore the call option is a fair trade on it's own but selling the put below the current price gives some compensation for the cheap near the money call effectively reducing the initial cost of the trade. Of course should the stock price plummet the put could be exercised and I would be obligated to buy the stock at the strike price...I could buy the put back when it approached the strike price to remove my obligation and not get stuck with the stock though.


This play just reduces the cost of the call option up front and effectively super leverages the capital as the two trades are taken as one. It also assumes that the put is worth selling so there must be some sort of expectation of volatility enough to justify someone betting that the price will drop.


I would stop both trades somewhere in case I were wrong about the overall stock movement.



Jeff.