The other day I commented on a recommendation from TV about buying Mastercard (MA), then around $255, and selling the August 270 call for $12. The commentator viewed the earnings report that came out yesterday as a potential (positive??) catalyst for the stock.
My comment on Tuesday was;
Big call premiums are often a siren song that some cannot resist. One observation I would make is that often when there are big premiums, the premiums are big for a reason.After the segment on Monday the stock went up to $270 on Tuesday and then worked lower the rest of the week, it got as low as $225 on Friday before closing at $237.
The action of this past week shows that the stock could easily trade back above the $255 where the stock was recommended or even above the $270 strike price. As the title of that Tuesday post suggested that was a lot of
That the stock so quickly moved beyond the amount of the fat premium as I suggested as being possible does not represent any sort of knowledge about the stock or its earnings but very simply this is a frequent occurrence in these sorts of situations. It will repeat many times over.
Buying a stock because it has a lotta option juice is probably the wrong way to come at this. If a stock you like has a lot of juice and you want to take advantage of that, ok, you are coming at it from owning the stock and selling an occasional option as opposed to saying to yourself ok, where can I find some juice.
6 comments:
roger,
On a relative basis where the action on a stock like MA has moved, where would you now rate a stock like MA if you owned it or was interested in buying it. Buy, sell or hold. Treat this as a hypo since i know you don't like to give specific reccomendations. Many stock do this especially after earnings and guidance so how do you approach this situation and make a determination on whether to buy sell or hold. What research do you use.
Thanks,
BWJR
Not sure I follow the question. If I do follow...if I already own it I doubt that one earnings report (good or bad) changes my thesis, the way I do things. As more of a long term holder a couple of months is usually not enough time to be right or wrong.
Roger,
Yes, but at 130 to 140 would you buy into at this point or hold as a long term investor.
thanks,
BWJR
roger - do you use sitemeter? if so, your site being down was probably caused by then. check out this link http://wwwwakeupamericans-spree.blogspot.com/2008/08/ie7-and-sitemeter-operation-aborted.html
I have been unable to access a few of the blogs i read over the past day cause of this error (incl yours). just an fyi if you use sitemeter
the sitemeter thing is odd.
the thing with blogger for me was a notification from them that my site might be a spam site. I entered some code which triggered a review by a human to make sure it was not. The block from publishing was then lifted. during this my site was viewable and comments could be left.
that sitemeter's problem could have been the trigger point for all of this is either way above my understanding or way below.
FWIW, although i don't use it much my computer has IE 7.0.5730.13 and as of now I can view my blog.
FWIW, I had the same problem as anon 6:46 over the last couple of days. Yours, however, was accessible and readable.
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