Earlier this week, CCI covered the Jan 12 $10 options we had acquired awhile ago.
Sold these options at $8.45.
This closed out the portfolio's holdings in Cisco.
- This lot made $.37/share.
- The earlier lot lost $.56/share
Never good to lose. However, the trade was established essentially at the market's peaks this year. Hence buying many, many other stocks would have lost a lot more. So this conservative play was at least successful in avoiding a big down draft in the market. (How's that for rationalization....lol).
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Going forward the situation at Cisco generally remains the same. A huge cash stock pile (over $8/share), and a very low valuation. (p/e around 10). I remain doubtful of the growth picture for the company, but think these valuations can create a nice floor for the stock price. Hence, when the stock pulled back to the low $18s today, CCI bought the Jan 13 $10 options for $8.35. (in essence rolling the options out one year). Note: there is almost no premium in these options ($10 options plus $8.35 cost, nearly equals stock price of $18.20). Going forward
- If CSCO gain we plan to write shorter-term covered calls against these options to generate income
- If CSCO falls we plan to double down with the acquisition of a second lot of shares