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The government owning this thing is exactly why I think this company is worthless. But you could be right. We will have to see. I will close my position over $50.
So then are you still holding AIG then? I guess you are doing a covered call on this badboy. What is your risk? I realize that the premium that you collect will give you some protection, but with a stock that can move 10+ points in a day, it seems that the risk my not be worth the reward on this kind of play. In my opinion CC strategy is for stocks that are range bound or not moving much. Momentum stocks like AIG my offer a "To good to Be true" premium. It is a high premium for a reason.
I have to share my experience from a few years ago when I first started trading. I was in this stock GTOP which is a biopharma stock and it was in stage 3 of its clinical studies. I thought it was free money, I bought the stock at $3.50 and was collecting almost $1.5 premuim for the covered call at the $4 strike. To make a long story short I had 4,000 shares and when I sold the shares I only got .10 a share.
I am not saying that AIG is going to .10 but what I am saying is that to me you need to be able to quantify your risk. With AIG that could be 10+ points to the downside.
Looks like I was right about the momentum continuing and so I sold half my position for $50 and holding the remaining 200 shares. I would be more than happy if the stock dropped $10 because that is exactly where I bought my first 200 and I'd basically be able to walk away with call premium and turn right around and do the same until the stock gets called away. Like I told Dom yesterday in my thesis traders who have put their money right alongside the government's have been paid handsomely: BAC, C, FNM, AIG, F, CIT, etc... "You don't fight the Fed" and I have held that thesis since last Nov.
Also try to keep these in context with AIG if you do the math adjusted for the 20-1 reverse-split the stock is still less than $2.5 a share (last year it was over $1200 a share), the CEO seems to want to make this a viable healthy company and not just firesale the individual profitable parts of the business, the government is going to ensure AIG succeeds or that the taxpayer makes out on their stake in the company and it appears as if the worst is over for this insurance company.
ThanX Dom for your question. It really made me think that last night to limit my exposure and not be too greedy by selling more covered calls but possibly watching the stock drop out below.
The government owning this thing is exactly why I think this company is worthless. But you could be right. We will have to see. I will close my position over $50.
ReplyDeleteSo then are you still holding AIG then? I guess you are doing a covered call on this badboy. What is your risk? I realize that the premium that you collect will give you some protection, but with a stock that can move 10+ points in a day, it seems that the risk my not be worth the reward on this kind of play. In my opinion CC strategy is for stocks that are range bound or not moving much. Momentum stocks like AIG my offer a "To good to Be true" premium. It is a high premium for a reason.
ReplyDeleteI have to share my experience from a few years ago when I first started trading. I was in this stock GTOP which is a biopharma stock and it was in stage 3 of its clinical studies. I thought it was free money, I bought the stock at $3.50 and was collecting almost $1.5 premuim for the covered call at the $4 strike. To make a long story short I had 4,000 shares and when I sold the shares I only got .10 a share.
I am not saying that AIG is going to .10 but what I am saying is that to me you need to be able to quantify your risk. With AIG that could be 10+ points to the downside.
Just another perspective.
Looks like I was right about the momentum continuing and so I sold half my position for $50 and holding the remaining 200 shares. I would be more than happy if the stock dropped $10 because that is exactly where I bought my first 200 and I'd basically be able to walk away with call premium and turn right around and do the same until the stock gets called away. Like I told Dom yesterday in my thesis traders who have put their money right alongside the government's have been paid handsomely: BAC, C, FNM, AIG, F, CIT, etc... "You don't fight the Fed" and I have held that thesis since last Nov.
ReplyDeleteAlso try to keep these in context with AIG if you do the math adjusted for the 20-1 reverse-split the stock is still less than $2.5 a share (last year it was over $1200 a share), the CEO seems to want to make this a viable healthy company and not just firesale the individual profitable parts of the business, the government is going to ensure AIG succeeds or that the taxpayer makes out on their stake in the company and it appears as if the worst is over for this insurance company.
ThanX Dom for your question. It really made me think that last night to limit my exposure and not be too greedy by selling more covered calls but possibly watching the stock drop out below.
Closed out my AIG puts today. I took a $700 loss. Looks like my play was wrong.
ReplyDelete