Intel’s removal from Goldman’s conviction “buy” list is meaningless!
Posted by Jack Haddad on February 14, 2008 at 12:50 pm
Bought 20 blocks at 20.52. Today’s downside, which is attributed to the removal of INTC from the conviction “buy” list, does not mean anything negative concerning the fundamentals of the company. INTC’s fundamentals are no different today than they were 3 months ago. Therefore, Goldman’s removal of INTC from their “buy” list recommendation is at best silly.
I also wrote 1000 March strike 20 calls at 1.25/contract, and 1000 March strike 21 calls at .72/contract. This is a good mixture of “deep” and “at the money” covered call strategy.
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Hi Jack - thanks for posting these trades - this is good strategy to learn from. So, in a nutshell you bought 2,000 shares and then wrote calls for 1/2 of those shares at a strike price of 20, and the other 1/2 at 21.
Per share, if the price falls to 20 before the March expiry date you lose 0.52, but gain 1.25 for a net (not including transaction fees) of 0.73. Assuming the price stays below 21 during the period you also pocket 0.72 for the contracts written at 21 and keep 1000 of the shares. So, are the strike 20 calls more expensive because traders are betting INTC will fall more than 1.25 before March? Thanks.
Oops - that doesn’t make sense - I think what I meant is that they are betting it will rise further.
I wouldn’t say that the strike 20 calls are more expensive; rather, because theyre more than the strike 21 because they pay a higher premium due to the fact that theyre “deep in he money” calls. This means that the shares, at the time of the purchase, were bought when the strike of calls was lower.