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Option ThoughtsFor those who are comfortable with the low risk option strategy of selling covered calls, you may want to consider this "option." Selling Dec 90 calls nets between $4 to $5 a share currently. Pros Stock would have to go to $94 by December expiration to get a comparable return (that is about $18 above current stock price. If stock is less than $90 at expiration you get to keep the premium and your stock Time premium will go down as we get closer to expiration, so if the stock remains under $90 you can buy your calls back at a lower price and keep the premium and your stock If you held your stock for longer than 1 year by expiration you will only be subject to the 15% long term gains tax If stock goes down, you can not only buy options back at a cheaper price, but the $4/share keeps you ahead as long as stock stays at $71 or higher You can continue this strategy by selling covered calls in the future (regardless of stock price) as long as you own the underlying equity (I don't condone selling uncovered anything, although I do own call options on HZNP which is "buying call options" not "selling them.") Cons If stock goes above $95 at expiration you will give up the amount of gain above that You can always buy stock back after it is called, but it will be at a higher price. Comments Obviously this play will depend on your view of where the stock could be after the November Q3 CC. $95 is a reasonable sell target based on stock potential (That would put HZNP at about a $21B market cap based on current 230M share float). Probably also a greater consideration for those with sizable positions in the company. |
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Msg # | Subject | Author | Recs | Date Posted |
1895 | Re: Option Thoughts | Drummer1517 | 0 | 8/17/2020 12:45:50 PM |