I thought there was supposed to be a pop in the price when PETM was going to move onto the NAS 100??? Methinks the big boys are selling Fido into this good news. Well, that's my opinion, anyway.
>>>I saw those premium quotes and that is what caused me to ask. The April 22.50's are what caught my attention. But, there is a good chance, in my opinion, that PETM will be at 22.50 by April and I don't want to let the stock go at that price.<<<
- This is true, but what you really should consider is whether it will fall in the short term below where it currently is (TA works great for this). If it does, you can buy the calls back, make the profit and keep the shares. Also, as you move closer to the expiration date, you lose some of the "time value" built into the premium, so it gets a little cheaper to buy them back. Incidentally, the PETM indicators are almost near their peak and may indicate the price will retrace in the short term, although probably not tomorrow.
>>>What happens if a guy sells the April 22.50's, and as we get to the end of the year, and beyond, and the price action starts to indicate that it may very well reach 22.50 by the expiration date. Do you then buy back the calls, and take a loss?<<<
- As the stock begins to get close to the strike price, you can buy them back at a slight loss, then sell a higher strike at an expiration further out. This way, you retain your profit on the call.
>>>Also, what happens if the stock reaches the strike price before the expiration date?
Can it be called away before the x-date?<<<
- Theoretically, it can be called at any time it goes above the strike price. However, this rarely happens unless it rockets well past the strike. Keep in mind that the premium you are making on the call is also being PAID by the person buying the call from you. So, if you sell April 22.50's at .80, the person buying them from you wants the price to be at least $23.30 to break even (22.50 + .80).
I have never had them called away before the expiration, even when the price has moved above the strike price. As an example, I sold Dec $10 ORCL calls for .85, but the tech stocks made a real run and ORCL has been above $10 for a month now. I bought them back last week for $1.00 when ORCL got back to 10.50.
So I have a slight loss, but I'll make it up when I sell a higher strike further out. ORCL announces earnings on Wednesday, so I won't do anything until after that.
One other thing to consider. When you are in an active covered call trade, you CANNOT sell your stock until you buy back the calls or until the expire worthless. Keep that in mind.
Covered calls work best in a downward or sideways trending pattern. An upward trending pattern is much trickier and really needs TA to help gauge the entry point.
Hope this helps...
The key at this point (IMO) is that after a few frightful trading/volatile days, the 'value' has so far been retained. The 'next step' -- when & how it comes is anyone's guess!! There are a lot of idiots who bought/traded PETM on the NAZ 100 'news.' The problem is that 15 companies were deleted and added, & since the Naz 100 was so overly loaded with tech garbage the most recent inclusions are truly old news........Been buying a couple of things lately, of course from the 52-week low list -- there are currently a couple of gems there.....Good luck to all.....
Thanks for your great investment suggestions and input. Many here have shared their picks, when they first enter a position, win or lose, and it's nice to see that you're contributing as well...
I'm sure you'll let us know what they are, when, and ONLY when, one is successful. What a convenient way to look smart...
Good luck to all...
Guess you'll have to wait till Dec 23rd when it actually IS added rather than Dec 26th, when it was announced. The QQQ and tracking mutual funds now have 4 more days left to jocky the price around in hopes of tricking folks into selling before next Monday.
It's the same every year. Expect more volatility as the week goes on, but the real movement up in price & volume probably won't come till near Friday as options expiration hits.
It's the same every year - just different companies and trading symbols. Do you want to make a guess as to what the move up from December to mid January has been for other stocks added to the QQQ in the past? You had better do a little more homework before you start bashing PETM for not having a move on announcement day. Come back an see us on January 17th when the next set of options expire and we'll see where it's trading - LOL!
I thought the sophisticated investors on the board said that they expected a very short term pop during the hour before the witching hour.
I think that is about 3:00 this Friday.
AH! Time will tell.