Long Stock, Stock UP since purchase
Next steps
1. Take no action – monitor price and change strategy if price outlook sours
2. If want to sell at my Target Price –> write Covered Calls
– look for Strikes = stock target price, short time to expiration, high option premium
– at least gain premium from selling
3. Buy Protective Put to protect downside, but require cash outlay to purchase
– protective put will “kick in” when price drops to strike price
– “insurance” is valid until expiration date
*Credit: OIC Beginners – Managing Stock Positions
Long Stock, Stock DOWN since purchase
Next steps
If stock is DOWN 5% to 10% since purchase
1. Sell the stock – cut loss
2. Take no action – might be market adjustment.
If I don’t see any news and outlook on the firm remains unchanged. It is OK to ride out the downside
3. Write Covered Calls
– sell to someone the right to purchase the stock at the strike price within the time frame
If stock is DOWN 10% to 15% since purchase
1. Sell the stock – cut loss
2. Take no action – might be market adjustment.
If I don’t see any news and outlook on the firm remains unchanged. It is OK to ride out the downside
3. Repair – “Double Up”
i.e. purchase the same number of shares at the lower price
(Pro) – to reduce Average Cost
(Cons) – double the shares, double the loss
3. Write Covered Calls
Which method to choose? –> see the yield (options calculator)
If stock is DOWN 20% to 25% since purchase
1. sometimes when I cannot choose the suitable priced short term option –> try LEAPS
*Credit: Managing Stock Positions