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Linn Energy, LLC Message Board

  • ronharv ronharv Nov 12, 2012 12:59 PM Flag

    LINE Option Play

    Just as I don't expect LINE to get to 44 by mid-April, which is my covered call strike price and month (although letting LINE go at 44 would be just fine), I also don't envision the units dropping to 33 by the same month. So I sold 45 puts of the April 33s for .65 in my regular account. If I lose this bet, break even is buying back the units at 32.35, which is more than 6 pts. away as of this moment. Even with the fiscal cliff business, Linn's hedges should provide a comfortable safety net (barring something unexpectedly calamitous).

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    • After selling the puts, I discussed the move with a couple of friends, and they gave me the raspberries. Too much uncertainty about what the GOP would consider loopholes (like MLPs). I argued that oil is sacrosanct to Republicans and to Democrat pols from oil states. They asked if it was worth worrying about, at least re a speculation on selling puts. Too much risk for small reward they said. So, with a sigh, I chose discretion over valor and took some small lumps by closing my position at .70 and .75. A small loss, but a dumb one, because I should have had the conversation before I acted. The larger issue at the moment, though, is how contagious are apprehensions about a potential impact on MLPs re a fiscal cliff deal. (I'm still smarting from Canada's broken promises when they blew up their royalty trusts and a chunk of my money along with them.)

      • 1 Reply to ronharv
      • Ron you are only confirming you do not have a clue about options.

        It has nothing to do with bad creative writing and emotions. It is all math.

        Obama appointed EPA regulator; over what was then the largest domestic oil producing region, who publically stated his style would be to find the first five guys he ran across and crucify them like Romans.
        I am praying Obama moves to the middle but it is absolutely irresponsible to assume it will. Besides the OLB just changes the subject and pretends they were not wrong.
        But the jobs are lost just like Coal.

    • marcarcal Nov 12, 2012 2:11 PM Flag

      I have a question? Can the idiots that are selling today & tomorrow, still collect the dividend scheduled for payout on wed, the 14th????

    • That is exactly why covered call writing is so deceptive.

      It is a gamble where where the odds of a positive pay off are more than made up in the entire range of expected return distribution.

      BY Ron^3 unwitting admission he should have bought a put.


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