netwrangler
10-24-2007, 05:21 PM
TRMB gapped down at the open this morning 14.2% below the prior close. They announced earnings yesterday, but I couldn't find a reason for the stock to gap down in the earnings report. The price later recovered to above the prior close and is now drifting slightly lower.
I am short NOV40 and NOV45 calls on TRMB as part of a covered call position. I missed an opportunity to buy back the calls, and then resell them on the bounce. If I had bought to close the calls when the stock was a $38 and sold to reopen the calls when the stock bounced back to $42, I was looking at $65/contract on the NOV45s and $225/contract on the NOV40s. But I was too busy trying to figure out why the gap to see opportunity pounding on the door!
Two questions:
There were several Form4s listed in TRMBs company news reports. The total shares number of involved was ~170,000 or close to 30% of TRMBs average volume. Am I reading the Form4s correctly? Does that number of shares look like a probable cause for the gap?
Seems like there are several alerts I could have set that would have prodded me to look at buying back the calls. The simplest would have been activate an alert set to trigger at, say $38/share and titled "buy calls to close, dummy". At some point buying the calls is obviously the best strategy:
a needed first step in unwinding the covered call position if the stock continues to fall,
a way to set up a profit opportunity if the stock bounces back.
Seems like there would be additional ploys using puts as well. Please feel free to coach, folks, I'm going to school here.
BTW: Bought half of the long stock position in TRMB last November for a split adjusted price of just over $22. I've milked the covered call cow several times since then. The original position goes to LT Cap Gains before expiry of the NOV options. Sweet!
I am short NOV40 and NOV45 calls on TRMB as part of a covered call position. I missed an opportunity to buy back the calls, and then resell them on the bounce. If I had bought to close the calls when the stock was a $38 and sold to reopen the calls when the stock bounced back to $42, I was looking at $65/contract on the NOV45s and $225/contract on the NOV40s. But I was too busy trying to figure out why the gap to see opportunity pounding on the door!
Two questions:
There were several Form4s listed in TRMBs company news reports. The total shares number of involved was ~170,000 or close to 30% of TRMBs average volume. Am I reading the Form4s correctly? Does that number of shares look like a probable cause for the gap?
Seems like there are several alerts I could have set that would have prodded me to look at buying back the calls. The simplest would have been activate an alert set to trigger at, say $38/share and titled "buy calls to close, dummy". At some point buying the calls is obviously the best strategy:
a needed first step in unwinding the covered call position if the stock continues to fall,
a way to set up a profit opportunity if the stock bounces back.
Seems like there would be additional ploys using puts as well. Please feel free to coach, folks, I'm going to school here.
BTW: Bought half of the long stock position in TRMB last November for a split adjusted price of just over $22. I've milked the covered call cow several times since then. The original position goes to LT Cap Gains before expiry of the NOV options. Sweet!