I do it to the downside because it prevents bubbles from forming. Bubbles are bad. Trading with yourself algo is bad when a long buyer uses it because it defrauds individual investors by inflating stock prices beyond what they are worth. This is literally the mind set of the short when he uses the algo.
Fools and their money
Sentiment: Strong Buy
Agreed. The most important thing is that the demand tis hrough the roof as you said. The currency and port issues although an annoying distraction should be disregarded. At some point the US dollar will weaken causing LULUs earnings to be higher than expected.
Just so you know I've been selling puts (and subsequently selling calls after being put the stock) for the last year. I've collected roughly 10$ in premiums in doing so. Yes you may not think that 2$ is much but then if I'm put the stock I will immediately sells calls 1-2 months out and get another 2$. You see how the dollars can add up. And in earnings time you can get 3-4$ for selling at the money covered calls for 1 week. I only do this on part of my position, the other shares I hold outright long. I consider myself an option expert so I do not expect many of you to get the strategy, so probably many of you will disagree with it. Right now I think LULU probably has made its move for the next couple of months. I don't see a huge rally or a huge selloff anytime soon, If anything maybe a slight pullback (it already dropped 2$, of course I could be wrong but that's what "I" believe). I think collecting premium when the volatility index is high (as it has been for this stock) has and will likely serve me well. And, if I'm wrong and the stock shoots up then YES I do leave money on the table…big deal.
well if we are going to be nitpicky you are technically right, his downside is capped at a paltry 2500% (roughly). His max profit is 4%. Great risk return ratio....
If you call this 'conservative' too, I have a bridge to sell you.
Selling options are far more riskier than buying options as your risk is not defined. Albeit the odds are with the options writers as the vast majority of options expire worthless and I've said luc is most likely going to have a well played position. Writing options works out far more often than not, but this fact by no means indicates it is a 'conservative' position. In fact it's consider they riskiest option play as stocks and markets decline far faster than they advance.
In fact the term "picking up pennies in front of a steamroller" originates from this type of trade and this type of risk return profile is considered a Taleb distribution.
Soliciting this advise as conservative on a board with many new investors is reckless.
@frbohnen, I do not think @coolhanluc18 has "unlimited" risk. His risk is capped at the cost of purchasing shares at $50 ($52.5 net premium) and $48.50 ($50.0 net premium). If his short option position is exercised, then he owns the shares just like someone that is currently long, but at a lower entry price. If he sold calls, then he would be in a position where his downside would be unlimited, unless he executed a call spread.
Thanks for the reminder about the ports. I read over the call transcript and they said exactly that. This is a company that plans ahead. BTW I stopped by a LULU store today and I couldn't believe how busy it was at 2 pm. Let's see what happens in the next few days. The market is on shaky grounds.
You'll probably get your chance to buy the stock at $50, but your opportunity will come about only because the stock is worth less than $50.
The port delays...as per the conference call, they guided lower to account for the port delays. They have also re-routed future shipments to Vancouver so they're leaving Long Beach and the problems behind. The worst case scenario is priced in already.
Best of luck on the options.
right, so now you are betting a base will form, when technically we are seeing a breakout (golden cross, very bullish), and fundamentally we have seen declining YoY profitability for the past 3 quarters. From a macro perspective the S&P had it's worst week in 3 years last week and a global macro sell off unquestionably sees a decline in all stocks.
Again, I've said you could more than likely be right, but this is by far not a 'conservative' strategy as is evident in your 48% CAGR number. I can list a dozen scenarios in which you leave money on the table
By the way the port delays is my second concern as I've stated in prior posts. Lets just hope for no major storms in the next couple of weeks.
Correct I do believe LULU after runnig 13 points should settle in the low 50S with a cap at around $55 for the next month or so. If it goes a lot higher I leave a lot on the table. If it drops further than I anticipate I get to buy in at a far lower price that I sold. Lets revisit this topic on JAN 16th option day and see what happens.