I gotta tell you, the most money I've made CONSISTENTLY - and THAT is the key - has always been with these rolling collars. You simply buy the stock at whatever price - the higher the better - and then short calls and hold puts as your protection. The real way to look at the put price is to divide the amount you pay by the amount of months still open. So, we have about 8 months until expiration on our puts that we paid $9.80 for.
$9.80 / 8 = $1.22 a month in insurance. Not much to protect a $50k investment (on 1000 shares)
HAL looks today like it's beginning it's pullback. The best price target I've seen is $60 with most in the low $50s. So that's a good thing because it lets you know that selling calls will be very profitable on this going forward and that the stock won't run away from you if you're short calls.
The key to making the most off this trade is to time the sale of the short calls that are 1 or two strikes IN the money when you feel it's about to fall back.
I think these short $45s will expire worthless with the stock under $45 next month. Rallies like this usually end with a drawn out basemaking pattern near the breakout. HAL like I said is not GOOG. So, the risk of it taking off are nil.
That means we keep the $2.85 for the calls allowing us to then sell month after month at or just in the money calls with the hopes many times of them calling us out but not really caring if they do.
If the stock falls into the $30s, no prob because we got the puts. Ideally, if the stock really falls into the mid $30s let's say for some reason, we just then sell the puts for profit and hold the stock long naked with maybe a covered call. Let the stock ride up again a bit and re-buy the puts for less. That also takes out $$$ for us.
If you sell the put for $12, then re-buy for $11, you just made $1.
See, there's all kinds of ways to play this and it's actually more active than it seems. And because it's so safe, you literally can do this as an 'all in' trade. All your money can be in one trade because you have such little risk.
