Option Investor

Portfolio Review

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A Good Month For Sure...

As the last day of the March options expiration comes to an uneventful close, we decided to take a brief look at the portfolio to see what, if any, adjustments need to be made in the older positions. Surprisingly, all of the spreads offered for the model portfolio are going to finish at maximum profit. This includes Netease.com (NASDAQ:NTES), which was closed early to lock-in smaller gains, and LM Ericsson (NASDAQ:ERICY), which we abused thoroughly in an admirable attempt to explain the stock "covering" strategy. Among the Bonus or Supplemental Positions, Frontline (NYSE:FRO) and Digital River (NASDAQ:DRIV) should expire favorably while Autozone (NYSE:AZO) is slightly negative and Centex (NYSE:CTX) is near "break-even" at $59.55.

Regarding ERICY, the "die has been cast" and much like Julius Caesar must have felt when crossing the Rubicon, there seems no reason to stop the (teaching) process at this point. With that idea in mind, we are going to sell (5) JUL-$30 call options for a credit of $1.70 per contract to reduce the overall cost of the position. In this manner, we can initiate a long-term "covered" call and explore the various components of stock ownership with this strategy. Although that's the only trade we need to make today, there are currently a number of active (but not unmanageable) plays in the portfolio and those issues will be discussed at length as events dictate. Look for a complete review of the MCM positions after the closing bell and with any luck, a few new spreads to supplement the current plays.

MCM Staff

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