by Travis Johnson, Stock Gumshoe | June 7, 2013 4:39 pm
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I like the bank warrants and am not up to speed but I did buy some on the first go around when it was talked about before and now not knowing or having a lot of experience in that type of investing it is nice to see you got a little more though I will sit tight till I feel more comfortable. Just the money printing DC game is a big ? but you explained everything real well Thanks Travis. You got any feel on the nat/liq/gas game on what seems to be a winner but now the Big Comp. Manufactors etc. seems like they want to lobby to keep it from exporting? Just a thought.
Thanks
Re: RST
I bought a mid-sized position a few years ago. After it came back to near my original $21 cost, I straddled it for $2.50 premium. RST went down again so the the put side bit ($17.50) leaving me with a full position (I wouldn’t want more!) at a net cost basis of $18. Then RST went into a deep funk (down to $7) starting in late 2011. When it got back to $14ish, I covered it (April exp) for $1.40 at $15. Of course I hoped that would expire as income (so I could do it again) but alas I am out with an $18 – $16.40 = $1.60 loss. With the same timing but without the option trades it would have been $21-$17=$4 loss. (It was selling for $17 when I got called). The last call was unfortunate but I got more than today’s price and I would be still holding….
Writing the Sept $15 puts looks attractive now at $1. You’ll either keep the $1 (23% annualized gain) or own the shares at $14 in September.
Caveat: RST options are thinly traded and quoted prices may not reflect the ability to trade there especially since there have been huge swings the last few days. Also: use a limit order.
Why do I do this? Well as Travis points out it’s hard to find a moated market leader in an unlimited market that has only a $300M market cap. That small cap makes the option premiums quite lucrative because of the implied volatility. I want to be long RST but desired to mitigate my losses. In hindsight doubling down at $7 would have worked better but things did not look good for RST @$7 and doubling down is a great way to lose a lot of $ on a falling stock…..
Whooooah ! That’s an inspirational comment. I look fwd to hearing MUCH more from you Paul. Im such a novice that I have absolutely no idea what you are talking about, but its inspired me to find out.
er, technically that was a written covered strangle not a written straddle since the put and call were at different prices $17.50/$22.50
(plus I had forgotten to check the “notify me” button..)
Thanks Paul, sounds like you’ve been busy on this one! You have to have a pretty strong stomach to trade options on small caps, but the premiums are certainly high if you’re trying to generate covered call income and are willing to be very patient with the underlying shares.
How about this tease “The one bullet about to destroy China’s “Internet Army” By Bill Patalon,”
We now have the opportunity to crush the attack China is waging from this soundproof 12-story concrete building… With an advanced technology breaking through at this moment… The side benefit is this: Because of its position with the Pentagon, one company is about to make unbelievable money for its investors.
I don’t know about you, but I love crushing threats to the United States and making a killing doing it. Rarely, in 30 years, have I seen a win-win situation like the one that’s unfolding right now. Or maybe I should say: WIN-WIN.
Within the next 24 months the Pentagon plans to spend enormous sums of money. They have no choice in the matter. The most credible estimates from the best experts say the outlay now exceeds $13 billion a year in the next 18 months.
Travis, I am with you on SCP.TO. Own an enormous amount of this company and believe it will grow, in time. I have always like Eric Sprott’s approach.
Travis, Have you reviewed or examined Stone Ridge reinsurance , SSRIX? A new kid on the block?