Even with the VIX so high, I would say that buying options far in the future on a conservative basis may offer higher yields and a safety of margin than tying up capital in this very ugly market.
The only capital one should outright purchase are dogs in this brutal market selloff and buying cheap puts in case of bankruptcy. I noticed that the stock price plus puts are still cheaper than the underlying business that may improve, be bought out, do nothing, or go broke.
So one must weigh the odds currently.
LIKE ABH, a company teetering on bankruptcy. The stock was at $4. Now at around $11. So that is a gain of $7. If one bought the $5 Put 2009 for around $4, one could have been up (7-4) $3 a share and it is still cheap. SmithBarney has a price target of $35. We'll see about that but that is my work in progress which helped with CFC 2009 call options.
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment