Be careful to leave your sons well
instructed rather than rich,
for the hopes of the instructed are better
than the wealth of the ignorant.
I’m very pleased with our education program so far but I wish you guys would leave more comments on the book site as we would really value your feedback!
This is just a quick update on the status of our first two plays:
On February 5th, we used BOBJ as the example of a long-call option. The stock was at $38.70 and the contract for the March $40s was $1.65. As we had $4,000 to invest and a goal of making or losing 10%, we suggested that, while you could purchase 4 March $40 contracts for $660, it would be wiser to do a calendar spread of 4 April $40s for $860 and sell 4 February $40s for $400.
Let’s compare the results:
Had you purchased the stock itself, you would have committed, let’s say $3,870 for 100 shares. The stock is now at $39.48 so you would have gained $78. On 2/12 the stock bottomed out at $38 so you would have gone down as much as $70 while you held it.
The 4 March $40 contracts are now worth just $520, a loss of $60 so far but those contracts traded as low as .70, a loss of $380, just about our limit! Of course my members know I would have been doing a ‘mon back at .70 but trade management is the subject of another post!
Our recommended April $40s, on the other hand, closed trading on Friday at $2.05, $820 on our 4 contracts while the February $40s we sold expired worthless so we have a net profit of $360 on our $460 (net) investment in just 2 weeks! The lowest level the April contracts fell to was $1.20 on the 13th and, even then, our loss on the spread was only $260, not as bad as the naked March calls.
This was the play we went with on the members site and, now that we’ve made a 74% profit, we need to set a stop at $1.75 to preserve a 50% gain or you can take half off the table, recouping $410 of the $460 that was laid out and setting…