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Whole Foods Market, Inc. Message Board

  • newpikachu newpikachu Feb 15, 2013 5:17 PM Flag

    Subject

    How about buying far out of the money August puts on them all?

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    • You could be buying them from me. I am always selling puts short. I never buy a stock outright. I always sell the puts at a strike price below the current price of the stock. In this manner I have practically always beat the market substantially. I own the stock with 85 puts and 118 calls short on it. If the stock goes below 85 and stays there, I will double my current position. meanwhile, my calls would expire worthless. If the stock goes above 118, they will call the stock away from me, which would make me very happy, and the puts would expire worthless. You can make more money selling puts and calls if the market goes with you, but if it doesn't. you lose everything. I do not know the short term trend for the market or individual stock. I do tend to have a very good idea of how to buy cheap on fundamentals. In this case, I will be more than happy to sell you puts at 80.

    • Not a bad idea. I've been too tight on my calendar, and have, obviously, missed on my prognosis of a market spanking. The power of the Fed is far greater than I was willing to believe. If the market is going to tank, it should happen in the next two months, however, if you're willing to buy far out of the money, the added time of an August'ish expiration is not a bad idea. I'm thinking a calendar put spread on LNKD, as it is the safest bet for a full blown collapse. I would really like to see WFM pop back up to $91, so as to recapture the losses incurred by the Feb puts.

      Sentiment: Strong Sell

      • 1 Reply to kmsmith08
      • What do you foresee in the next two months that leads you to say this?

        I like buying longer dated options because there is more time for the market to move in my direction. I also think it is good to have puts on several high flyers because even if the market continues in an uptrend, one of these can always suffer adversity and take a serious hit. It doesn't matter what people say to justify valuations of some of these stocks, they will implode in adversity. The things people say to justify LNKD valuations now aren' t much different than what they said about other internet stocks before the crash in 2001.
        Finally, I'll buy far out of the money because I like the risk/reward ratio. Premiums are small enough that a total loss at expiration is tolerable, while the potential profits are big enough that just one trade going your way can more than make up for loss of premium on all the rest.

        How would you construct your calendar put spread?

 
WFM
48.13-0.39(-0.80%)Apr 17 4:00 PMEDT

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