1. Your maximum profit is capped at $3.10 per share. If the stock returns to its 52-week high of $56.85, you will have left significant capital gains on the table versus simply buying shares outright.
Yes that is true, but I already have almost a 10% allocation to UBNT in my portfolio. For me this is not a risk in this case.
2. Because you may be assigned shares, you have to take the potential allocation into account. Remember that you’re still exposed to the full downside risk of the stock in the event of catastrophe. That means you may be forced to hold a smaller position now just in case you end up with those shares.
First, I mistyped. If assigned, my cost basis will be $36.90, not $36.10. Yes, this is a real risk. However, for me it is not catastrophic. I have about a 10% allocation now. If assigned, I will have a 12% allocation which is still manageable. Also, I can take one of 2 actions which I sometimes do. First, I can repurchase the options and take a loss. I rarely do this. Second, I can roll the options for to September by repurchsing the August puts and simultaneously selling the same number and strike of the Sept puts; this will almost always result in collection additional premium.
3. If the stock dips significantly, you may not feel able to take advantage because there’s a chance you’re going to end up with more shares from those puts. If it then rebounds, you’ve left more money on the table since you didn’t take advantage of the opportunity to add at a great price and also probably have a smaller share position to account for the potential of more shares from those puts.
Yes, this is the real risk. In the case of UBNT, I believe any drop would be temporary in which case I could allow that shares to get assigned and then sell covered calls or sell the shares once it comes back up. If the business is permanently damaged then I’ll have taken a severe loss.
Saul decided to purchase additional shares outright above $42. Selling the puts offers an alternative to additional purchase (especially if one has a strong conviction and already has a large position).
Hi Chris, I’m sorry but I just don’t know all the ins and outs of options and it’s a whole new set of risks and possible profits. I feel better just sticking with what I know, but thanks very much for the suggestion.
Not to butt in, but in simple terms; “I” is for italic. “B” is for bold. “TT” is for monospace font. All of those follow the usual Fool posting conventions (autoline wrap, etc.)
The only one that’s different is for charting: “PRE”. (see below)
You use them like this:
Italic </I>
Bold </B>
Monospace </TT>
When setting up tables, it’s usually easier to put them in some sort of word processor, using a monospace font and simply adding enough “spaces” to get the columns to line up. (You don’t have to use a WP, the Fool’s posting window (“Your Reply”) is already monospace.) With the “PRE” command there is no autowrap for lines, you have to add them (just as you would in a word processing program.) There is no ability to use “tabs” in the Fool’s HTML. So, a chart would look like this:
```
Chart in monospace
Year Chart Value Chart Value2 Chart Value3
1969 45 56 45
1970 61 55 42
1971 83 44 31
```
You can use these in combination Italic Bold or Bold Monospace but that’s generally getting carried away, eh? The only other thing you need to know is that for TT or PRE you can use all caps or all small, but not a combo. “Tt” or “Pre” won’t work.
You can avoid the “PRE” command by clicking the “Table Data” box directly under the “submit message” button, but that changes the entire post to Monospace and makes it a bit harder to read.
Every letter is exactly the same width, whether it’s an “i” or a “w.”
Most fonts use variable spacing (technically: Proportional spacing) so narrower letters don’t end up with a bunch of “white space” on each side. But variable pitch letters are a nightmare for column formatting, so you use “monospace.”
abcdefghijklmnopqrstuvwxyz
abcdefghijklmnopqrstuvwxyz
Note the difference between the “h” “i” and “j”.
It’s called “kerning”, which is a word you will probably never need to know again unless you are a contestant on Jeopardy. In case you are and the category is “print arcania”, “leading” is the amount of space between lines, coming from the days when they used little slivers of lead in the old linotype machines to keep the letters from sitting on top of each other, line by line.
It’s called “kerning”, which is a word you will probably never need to know again unless you are a contestant on Jeopardy. In case you are and the category is “print arcania”, “leading” is the amount of space between lines, coming from the days when they used little slivers of lead in the old linotype machines to keep the letters from sitting on top of each other, line by line.
Just to keep everyone’s Jeopardy hopes alive, leading is indeed the space between lines of type so called because in the letterpress days that is how they kept the type from getting jumbled up when being set. However, that was not used in Linotype machines because each line was individually cast and the machine could put in the line spacing (the leading).
The slivers of lead were used when hand setting type (little bitty letters, one at a time.)