ThePanelist.com - Adding to my General Electric Exposure by Selling Puts

Adding to my General Electric Exposure by Selling Puts

Written by David Neubert

Wednesday, 06 June 2007

Every hedge fund is long their little portfolio of favorite stocks and short the market. For almost everyone, "short the market" means short S&P500 futures or SPY (the ETF that represents the S&P 500). With a market cap of $386 billion and representing 2.9%, General Electric (GE - $37.29) is the second largest company in the index (#1 is Exxon (XOM - $83.62). So with nearly every hedgie operating in U.S. markets short GE, what do I want to do? OWN IT!

Last week I sold Jan 2008 37.50 strike puts on GE at $1.71 (-WGEMS - $1.91). The stock was trading at around $36.65 at the time. Yes, I know I should have logged the trade. But remember, as it says in the disclaimer "I do not log every trade."

So if you don't own at least 2% of your portfolio in GE, you're short it. I have to keep accumulating the stock. Selling the 37.50 puts is just part of that process that creates a break even price at under $36.00. I only see GE dropping if the market as a whole falls, and if that happens, I'm likely to sell some municipal bonds or treasuries, buy back the puts and buy GE directly.

My love affair and ongoing accumulation of GE is documented by hitting the ticker "GE" in the tag cloud.

General Electric, to big too be ignored from DavidNeubert.com.

Disclosures and Confessions: I own GE. I am short GE Jan 2008 $37.50 puts (-WGEMS). I am also short GE Jan 2008 $30.00 strike puts (-WGEMF).

Site Disclaimer

Don't Try this at home disclaimer: I am an expert and options may be for me but they are probably not for you. You can lose way more than your entire investment playing in options. If you play too much in options you can even lose your home, mortgage and all. Now who would that be good for?

Tags

See All Tags

Options

Comments (3)

Subscribe to this comment's feed

...
written by flusher , June 09, 2007

I just love writing puts on GE or for that matter HD and Low.
Great stocks that can be bought at lower prices that way, If the go up, take the premium.
Been doing it for 20 years plus.
The best option strategy

...
written by David Neubert , June 13, 2007

I've been thinking about writing (selling) puts on Home Depot (HD) as well. Though I think that's a little more risky than GE.

Disclosure I own HD.

...
written by Alex Landefeld , July 06, 2007

Hmmm. Just lurking. I've been long GE for some 6 years, having sold some for home-buying purposes, but trying to stay in somewhat for sentimental reasons (my father gifted the original shares...and the dividend reinvestment is nice)...but I'm intrigued by your options talk.

I'm just learning options, reading the book "Getting Started with Options", so I won't ask any questions just yet. You can see my level of understanding before the Michael Thomsett book on epidsode 2 of http://logos.blip.tv/...so I'm starting pretty low...but thinking in the direction of just out-of-the-money aapl calls (as you can see from a previous post, I'm somewhat bullish on aapl).

David, I like and respect your admonitions about doing your own research...I tell all who ask me about investing the same thing. Kinda like learning Tai Chi: if you don't have the patience to put in self-learning, you probably won't have the patience to sit through a volatile market. :-)

..Alex.

Write comment