Showing posts with label HP. Show all posts
Showing posts with label HP. Show all posts
Friday, January 29, 2010
Monday, January 25, 2010
Bought calls on AAPL, HP
Today I bought LEAP calls on my two largest positions. I bought 2012 LEAP calls on HP at a $40 strike for $12.70 per share and a 2012 LEAP call on AAPL with a $180 strike for $56.50 per share.
Buying the calls means I own the right to buy the stocks at the strike price any time between now and January 2012. It's a good way to regain liquidity without sacrificing too much upside potential. I can now sell my full positions of HP and AAPL if I need the cash to buy cheap stocks, but I will still profit if HP and AAPL continue to rise.
Buying the calls means I own the right to buy the stocks at the strike price any time between now and January 2012. It's a good way to regain liquidity without sacrificing too much upside potential. I can now sell my full positions of HP and AAPL if I need the cash to buy cheap stocks, but I will still profit if HP and AAPL continue to rise.
Thursday, September 10, 2009
Let your winners run
I posted the following on one of my favorite boards, on the topic of taking profits on multi-baggers or letting your money ride. This is true only from an investment perspective, when you've done significant research on your position. Speculators probably do something different. I'm not being catty; I don't understand the spec mindset.
Personally, I prefer to let my winners run, but when I keep a big gainer I also use a stop-loss order to bolster my selling discipline.
It's easy to overlook a "slow leak" in a position; I've been surprised by sales from a stop-loss order I'd placed and forgotten.
It's possible your order will trigger, and then the stock will reverse its losses. Stop-loss orders are useful when you've picked a sales price you'll be happy with, but are not concerned with selling at the absolute highest price you can get. You can also set the order to sell all or part of your position.
I'm doing exactly this with a big winner, Helmerich & Payne, HP. Bought at $7.89, it's now a 350%+ gain; the old saying "pigs get slaughtered" is echoing in my head. However, I still love the stock.
Instead of selling, I have a stop-loss order in place to sell PART of my shares if the stock drops to $31. That's a large enough gap that the order won't be triggered by ordinary market fluctuations. I'd be selling about a third of my position, which would recover my original investment, plus a little extra profit. Two-thirds of my HP position would remain invested; I'd sell that portion only if the reasons behind my original investment hypothesis changed.
This allows you both to preserve your profits in the face of irrational market pricing changes, and to capture the out-performance of stocks which have already proven themselves to be winners.
Personally, I prefer to let my winners run, but when I keep a big gainer I also use a stop-loss order to bolster my selling discipline.
It's easy to overlook a "slow leak" in a position; I've been surprised by sales from a stop-loss order I'd placed and forgotten.
It's possible your order will trigger, and then the stock will reverse its losses. Stop-loss orders are useful when you've picked a sales price you'll be happy with, but are not concerned with selling at the absolute highest price you can get. You can also set the order to sell all or part of your position.
I'm doing exactly this with a big winner, Helmerich & Payne, HP. Bought at $7.89, it's now a 350%+ gain; the old saying "pigs get slaughtered" is echoing in my head. However, I still love the stock.
Instead of selling, I have a stop-loss order in place to sell PART of my shares if the stock drops to $31. That's a large enough gap that the order won't be triggered by ordinary market fluctuations. I'd be selling about a third of my position, which would recover my original investment, plus a little extra profit. Two-thirds of my HP position would remain invested; I'd sell that portion only if the reasons behind my original investment hypothesis changed.
This allows you both to preserve your profits in the face of irrational market pricing changes, and to capture the out-performance of stocks which have already proven themselves to be winners.
Sunday, June 28, 2009
Batten down the hatches
I anticipate another broad market correction during the next six months. Because of this, I'm currently writing covered calls against several long positions in my portfolio. These calls are written against stocks for which I do not anticipate a significant price increase in the next six months or a year, and which I do not wish to sell because I like their long-term prospects.
I'm choosing calls with expiration dates in August, September, and October.
Writing covered calls will increase my cash position (currently 36% of my portfolio) so I can buy more stock during the downturn. In addition, the premium paid on calls at a given strike price is linked to the current share price. Consider;
Example A: The stock is selling for $34, and the option's strike price is $35,
or,
Example B: The stock is selling for $30, and the option's strike price is $35.
Writing a call is a promise to sell my stock at that strike price on or by the expiration date. I can expect to be paid more for that promise when the share price is only slightly below the strike price.
Since I anticipate share prices will decrease in the short term for each of these stocks, I'm writing the calls now to take advantage of the current, higher share price.
There are other stocks in my portfolio upon which I could profitably write calls, but have chosen not to do so. In each case, there is a special situation with the stock which makes using options undesirable. In one case, the company (AGU) is in the middle of widely publicized take-over negotiations. In another case (UMH) the company is too small to have open options interest. A third (HP; that's Helmerich-Payne, not Hewlett-Packard) is such a valued part of my portfolio that I won't risk it being called away.
I'm choosing calls with expiration dates in August, September, and October.
Writing covered calls will increase my cash position (currently 36% of my portfolio) so I can buy more stock during the downturn. In addition, the premium paid on calls at a given strike price is linked to the current share price. Consider;
Example A: The stock is selling for $34, and the option's strike price is $35,
or,
Example B: The stock is selling for $30, and the option's strike price is $35.
Writing a call is a promise to sell my stock at that strike price on or by the expiration date. I can expect to be paid more for that promise when the share price is only slightly below the strike price.
Since I anticipate share prices will decrease in the short term for each of these stocks, I'm writing the calls now to take advantage of the current, higher share price.
There are other stocks in my portfolio upon which I could profitably write calls, but have chosen not to do so. In each case, there is a special situation with the stock which makes using options undesirable. In one case, the company (AGU) is in the middle of widely publicized take-over negotiations. In another case (UMH) the company is too small to have open options interest. A third (HP; that's Helmerich-Payne, not Hewlett-Packard) is such a valued part of my portfolio that I won't risk it being called away.
Subscribe to:
Posts (Atom)