If you don't...you don't. Nothing to apologize for. If you prefer etfs or a mut fund, you eliminate exactly this type of risk, and it's smart, more often than not.
That's a good question. I spotted it at about 34 and really liked the chart as a trade and traded it seveal times successfully up to 38, I alos saw favorable analyst coverage, not just any analyst, but one who had called some great little bios. Then it got into the forties, and it seemed to be running hot into the fifites. Hey biotech has been super hot. This drug that failed was supposedly pretty promising and far along the trial path. If you are asking if the fundamentals supprted the price, no, they rarely do with small bios. Trading them is more a crapshoot. I sold some 40 struck calls and was pretty happy to get over $6 for them. They will ease a bit of the pain, not much. This has been a vicious drop, amybe the worst I have ever seen and I've been around.
AAPL would still be $6 and $12 or $17 from back then if it had not come out with market-changing products. When it was in single digits it was selling LISAs and odd, cultish computers. That's the difference. Most often, and I would really, really like to be wrong, once a biotech has been obliterated this badly....you're talking years for recovery. I'd love to be wrong and I'll be the first to admit it.
First, if you think COP is going a lot lower (I do) then you just SELL IT. Really, you have to be somewhat sophisticated with a so-called "married put" strategy to make money. If you are not, you are not, What you CAN do is to generally FREEZE the value. To do that, you want the "cheapest" puts you can buy. Cheapest is not lowest cost. Cheapest means those puts which have very low extrinsic value. That means "in the money" and in this case DEEP in the money. If you don't know what that means, you have to go learn about options. Anyway, I do not think COP will stop and turn around in Sept or Oct, thus I wanted AT LEAST November and you may want more time. It will cost. It all costs. So I priced the 60 puts, I can't recall what they were, but the 55's (which will cost roughly $5 less) were not bad. So I bought those.
If you do not want to sell, you start thinking about how long you want your protection for. Me: A long time. As to figuring out which put is "best". First, ask "why am I buying this?" My answer (and it may not be yours) This stock is going lower, I strongly suspect it will have very little upside til year end. I would like to collect the dividend as long as I can. (Rest assured, however, should COP decide to reduce or cancel the dividend, it will take a serious dump NO MATTER WHERE it is trading at that moment.) This means COP could get into the 30's. I do not know. I can not predict. The puts are a way I can stop worrying about a 5 point dump and focus on other things, OR, trying to trade COP to make some money apart from my holding which is turning into a running sore.
Very dangerous to bottom fish as a straight stock long. If you are willing to be stopped out, there is little to worry about. You know, instead of worrying about whether you catch the dead bottom, you could pick 3 different spots and place a 50 cent stop and if you are stopped out 3 times, then you've lost $1.50 which is a mere 3%.
All these oils appear at this point to be doomed for the foreseeable future and there is no question that they will be caught up in tax selling until the end of the year. You don't have to like this, but it is what will be happening. These stocks were (and remain) very widely owned, they were so great for 5 years, and now they suck. I seriously doubt you'll see much upside in them until 2016. Or unless we see some reason for Iran NOT to flood the market with yet even more oil than they plan to. You'd be better of buying XLE, though there will not be a much of a dividend.
It's not safe to buy these without stops. That's my bottom line. Disc: Long 900 COP. Long 60-struck puts out to November.
I get continuously bashed by people calling me crazy for shorting oils. You ought not do it with the common, but with puts, so that you will not have to pay out the dividend. You are correct, all of these lost 5 points or so, XOM, CVX, COP. Brutal.
Pardon me, I thought you were a seller. I am not incredibly bullish on COP nor this sector though I am long 900 COP. Buying the calls makes much more sense. However, I'd maybe take a different slant, buy some much shorter-in (and thus cheaper) calls to try to ride a probably dividend-collection runup into Aug 12. Then see how things shake out before making a longer term commitment.
The multiple problems with selling such distant calls are that 1: they offer very little downside protection. 2: You are in effect making a very long term prediction at a sort of "panic point". This is not good to do. 3: Should COP climb a couple of bucks which it could do, your stock would be subject to callout if your calls are in the money over a dividend declaration. (Very unlikley but not impossible with LEAPs) 4: You will not get the opportunity to buy back those calls unless and until COP gives up another $2-3-4, at which point the $4 or $5 you collected for selling them will seem like a poor reward, which it is. This is too many problems.
The approach I would take, and plan to take, is to wait for a buck or so rise out of COP. If it happens, it happens. If not, you can over pay for those puts, S'OK. Buy let's say 60-struck puts for Feb '16. They cost 11.15 x 11.09 so maybe you pay $1.50 extrinsic value. Buy 1 put for every 100 shares you own. This freezes the value of your stock position. "Married puts". If COP rises, buy a few more, a few more, lower your cost on those puts. Suppose you now get to 1.5 times the no of shs you own. Now, against the excess puts, you sell lower struck puts about 2 weeks out, which you want to expire worthless. Bear put calendar spreads. Aug 14 50-struck puts are .85 x .95. The idea is to KEEP your Feb '16 puts and repeatedly sell closer in puts against them for 80 cents. And you are going to have to do it 4-6-8 times. This way, you freeze the value of your COP common. You are not in danger of being called away over a dividend.
Good question. It's been a slow ride to lower prices, that's for sure. I was fully hedged since 67 but I thought the bottom had been reached about 52.50 and sold off my protective puts which had tripled. (You don't want to let puts get to $12 and $14 anyway, you want to reset them) So I didn't take the full beating. I'm a long term (10+ year) follower of the co and I believe it is a superb operator and knows what it is doing. Still it can't escape the tyranny of /CL prices and the market perception of the earnings impact. COP et al are probably done for the year in that they will be victims of tax selling from here on out and it won't be "buy the dips"...it will be "sell the rips". My plan is to (at least) 150% hedge further downside and collect two divvys until 12/31 and lay low. I believe the stock is much closer to a bottom than a top but there is little if any upside until oil prices start upwards. I think hte market was quite spooked by that vicious end-of-day oil selloff Friday. Wicked.