I've rode the Google train for quite a while, but I'm getting nervous about the overall market. The indexes look fairly bullish short-term, but the market is overbought and if the market start to roll over at this point I think a decent correction (5% or more) could happen.
Anybody else argee?
BTW...I'm not selling GOOG yet, but I will be hedging with options. More likely sell calls than buy puts.
Thank you for taking the time to explain, it is much appreciated. With Google, it looks like the best time to write calls is no more than two weeks from expiry because of its volatility even if the premiums are a little lower.
I suppose if you write the calls out to March you could write them quite far out of the money, say $520 to $550. Mind you that can dissappear very quickly with the forcasted good earnings expected in Jan 06.
It is somthing I might try soon with a small covered call, just to wet my investment feet a little. Thanks again
Writing Covered Call Options is a way for you to sell the RIGHTS TO BUY your equity shares without having to necessarily sell any of those shares. You are paid a premium for that right...it is the bid price (or higher) on the option strings or chains that you see for GOOG or any other optionable stock.
If you owned 500 shares of GOOG, for example, and GOOG was now selling for $418 a share and you wanted to sell the rights to buy your 500 shares (or any 100 share increment of your 500 shares held) by this Friday's DEC option expiry, you would be paid cash of at least $2.70 per share for that right (as of today's close).
So, in this example, if you sold the rights to ALL 500 shares of your GOOG, you'd get $1350 cash in your account immediately and you'd keep your shares as well unless the stock closes higher than $420 by Friday's close.....in which case, you'd be "called out" (forced to sell) your stock for $420 a share. So, your profit would be equal to all the gains you made on your shares by selling at $420 PLUS the amount paid to you of $1350 for the right to your stock.
If, on the other hand, the stock closes below $420 on Friday, you keep your stock AND the $1350 premium and your obligation to sell at $420 ENDS. You can then do this whole thing all over again for the JAN (or any month) call options.
In an earlier post on this thread, I explain how to unwind your position if the stock takes off, then rewrite c.calls again, etc. But, if you expect a stock to take off, I do NOT recommend writing covered calls at all. You should be BUYING call options in that case, not selling/writing them.
screw covered calls.
look up credit spreads on McMillians site. goal being to take in time premium. example is you buy Jan 450calls at 6.4 and sell the Jan 420calls at 16.40
if google is at or below 420 come Jan expiration you keep the 10
"Are you guys KIDDING ME? LOL! Why are ya'll coaching me on options basics? I've been in the options market for a year now. GEEZUZ! People these days!"
Wow... an entire year!! I guess that makes you George
>"you can do it 200 time a year though."<
Get real. Being right ONCE a year is tough enough, and you expect someone to risk all that $$$ and be right 200x? LOL.