Quote:
Originally Posted by busta21
Buy silver contracts...let it pull back a bit from $42 level, then look at July 49 CALLS.
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lol. I don't think trading long calls fits his risk profile.
http://finance.yahoo.com/q/os?s=SLV&m=2011-07-15
The SLV play is:
1. Buy 1000 shares for $42.2K ($42.18/share)
2. Sell July $45 Calls for $1.91/contract
3. Pocket the $1910 ($1850 after commissions)
Hope it's at something in the $44-$44.99 range on expiry and then repeat the process by selling Sep or Oct calls to people like you.
If it's over $45 on expiration and the shares get called out, no worries bc it means he would have made $4700 without having to worry about short term capital gains within the confines of his IRA.
When factoring in the money made in writing the contracts, the stock would have to drop below $40.30 for him to lose anything.
There's definitely something to be said for trading long calls. You can make a lot of money, and it can actually be pretty fun if you know what you're doing, but I don't get the impression that he's willing to take on the risk, stare at Level 2 quotes and wage battle against the i-banks, hedge funds, and day traders all day every day and he is therefore definitely much better off just taking his 4% every 3 months.