Option Investor

Option Writer Portfolio - September

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Coach, Inc. (COH) engages in the design and marketing of accessories and gifts for men and women in the United States and internationally. The company's primary products include handbags, women's and men's accessories, footwear, wearables, business cases, sunwear, watches, travel bags, and fragrance.

I am taking the slight bounce from the 21 day Exponential Moving Average (EMA) as a positive sign to sell the September 27.5 calls. COH reported earnings in July so there isn't anything coming up other than its Chairman and Chief Executive Officer, Lew Frankfort, and members of the senior management team will present at the Goldman Sachs Global Retailing Conference on September 4, 2008. Although COH is in a different industry category than Tiffany's (TIF), the Consumer Discretionary sector on the higher end seems to be holding steady. Selling 4 contracts places the position near the $10,000 exposure mark. If you are more risk adverse, then sell less contracts. If your portfolio is larger than the hypothetical $20,000 portfolio then sell more contracts. There is the uptrend line at $25.50 and the recent low at $26.13 as the support level. Therefore, a close below the 21 day EMA will be our first alert and the Cost Basis will be the stop.

Risk Management for COH
Strike Stop = $ 27.50
Cost Basis Stop = $ 26.95
Technical Stop = $ 44.70
% Above the Strike 5.27%

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