RE: RE: RE: RE: RE: RE: Dont rushToday I acquired 50 additional call contracts, strike $8 expiring July 2012. Cost of 40 cents a contract, total before commissions of $2,000 gives me control of 5000 shares that direct ownership would have cost me $35,000. Yes I do not get the dividends, but these are close enough to the money that my delta on the option contracts is close to the delta on the stock and the option delta will increase as the stock price brings the strike into the money, if and when. In other words, if the shares recover, I will recover about the same in absolute terms as I would have had I risked $35,000.
I am also long the stock, but have not done much averaging down on the stock itself, choosing instead to average down through call options. I have April $9's and July $8's, controlling about 70,000 shares. Secondary thought in choosing these strike prices is that if there is ever a takeover, these are likely to be below the offer price. Same worked out well for me with Daylight, where my options were all in the money after the offer, having in that case $6, $7, and $9 strike prices, with net returns of up to 900%.
Obviously if NAL stays at these levels through April and July of next year, I lose all the investment in options, but volatility can be ones friend, and I have enough options to average my exposure down on price bumps.
Not for everyone I'm sure.
Terr