I was looking for ways to roll with PFIE coming up to earnings on 2/12. I am long PFIE and would be perfectly happy with keeping them through this drop in oil prices, but I think I’ve found a way to significantly decrease risk while only barely decreasing potential returns, and just wanted to share in case anyone else was interested in it.
It is currently selling for $2.85. I sold some of my current shares at that price, then bought a corresponding number of 2/20/15 $2.50 calls at $0.50. The way I’m seeing it, if the earnings are not good, then shares will likely decrease to below $2.50 leaving me with a total loss of my premium (which is 17.5% of the current stock price). If the stock price decreases to $2.34 or below, I would end up losing less money than I would have had I held on to the shares. If it drops to between $2.35 and $2.50, I’d end up being (slightly) better off by hanging onto my current shares. But if the stock price stays anywhere above $2.50, I’m leaving the $0.15 per share on the table ($2.50 call price plus $0.50 premium), thus giving me about 5% less upside but without having to worry about having my current position value trimmed by anything more than 17%.
Anyone of course feel free to critique my plan if you see something that I’m not - I’m certainly not saying that this is a bullet-proof plan, and if there’s something that I’m missing I’d love to hear about it.
Tim