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BIOLASE, Inc. Message Board

  • i_gotta_have_more_cowbell i_gotta_have_more_cowbell Oct 5, 2013 12:52 PM Flag

    Preserving Your Wealth

    So you bought $20K worth of BIOL at $2, and maybe you don't really know why, but that Cowbell guy was right, and the stock trades at 5.80 next year. We don't wait for things to happen, we plan for them. That's why we're discussing this ahead of time.

    On Oct 18th 598 calls are going to expire, I sold some of them, which means the buyer paid me for the right to buy my shares, but since the stock price is lower than the strike price of the call, they will expire worthless, I keep the premium, and my shares. That is covered call writing, but you know I have something better for you ;)

    A credit spread will take us to the next level, this will sideline your $20k and protect some of your gains, and give you upside exposure, without selling shares, or risk missing out on further gains. You want to know how some investors seem content no matter what the market is doing? It's with tools like these.

    10,000 shares at $20k becomes $58k next year, and you will sell 100 covered calls with a strike price of 2.50 for which you will be paid $33k. That preserves your gains and protects you from loss all the way down to 2.50, pretty safe considering that even if the stock went totally belly up, you'd still have $33k in cash form your $20k investment. The next step is to turn this into a credit spread by buying 100 calls at the 5.00 strike, there will be some premium over the .80 intrinsic value on these. To keep the math simple let's say they have .50 premium + time value for a cost of 1.30 or $13k (one of the rare times I will justify a heavy premium)

    At this point you should have 10,000 shares, 100 2.50 calls against them, 100 5.00 calls against someone else's, and your initial investment of $20k sitting in cash. Scenarios vs. straight stock play:
    • Stock falls $3 to 2.80 you walk away with $45k vs. $28K
    • Stays flat at 5.80 you walk away with $53k vs. $58k
    • Rallies $3 to 8.80 you walk away with $83k vs. $88k
    The cost for this insurance comes from the premium on 5.00 Calls

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • who in their right mind thinks they can "preserve wealth" in a penny stock? much safer vehicles to "preserve." and buy "preserve" do you mean buy long at $4, $5, and $6 and ride it all the way down?

    • zombie $uck...biol can to Zero

      can you counter this ROAR?lol

      Sentiment: Strong Sell

    • WOW! Tinkerbell is giving advice for when "the stock trades at 5.80 next year." ROFLMAO, she is just so unintentionally funny it hurts. There is sol little chance of that happening it makes my head spin.

      Sentiment: Sell

      • 2 Replies to lookingforatenbagger
      • Tinkerbell opines, "he cream always rises to the top" and perhaps that is true. The question is, "Does it take 10 years for cream to rise?"
        Sentiment: Hold

      • That's what you said about my 5.10 fundamental target in the spring, that was above the then 52wk high of mid 4's, but it went there three weeks later, and hung out for 8 consecutive trading days before I called for a .50 technical breakout that took it to 5.60. I didn't need anyone's analysis to know it then, and I still don't need anyone's analysis to know 5.80 is soon coming to a theater near you. Get ready for more head spinning. I wonder if they'll base any warrants on 5.80 like they did on 5.10? Maybe that's how they'll buyout NewTom? ;)

        No matter, this is the play when we arrive. Anyone trading along will see how elegantly simple this is and will wonder why they didn't do it sooner, then laugh when bashers insist longs are losing money while we sit on a bigger pile of cash than we started with no matter what the market does. It befuddles the simple minded, but it's just good strategy, and planning, not magic.

        Is any of this sinking in yet? I don't have to worry or care about a stock retracement. But, the fun doesn't stop there, I can actually parlay that event in to a greater position using someone else's money! Who's the buffoon; you who took huge risk for a .50 short profit when you panicked and covered on two day rally June 18th, or the investor who is can improve his standing with a depressed stock price? I will make an investor out of you yet, at the very least you will help me make informed investors out others that follow along for entertainment purposes.

        That sick feeling in your belly is the realization that I have been building my wealth using other people's money, and every time you "ROFLMA" at my buys I'm getting the last laugh because it's not costing me as much as you think it is ;)

        Try it for yourself, and when it works for you, I don't even want an apology or concession from you, just promise to stop being so douchy

 
BIOL
2.22-0.03(-1.33%)Jul 28 4:00 PMEDT

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