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Frank wrote:
>cnishida wrote:
<<For what it's worth, here is my real-life example of rolling up QCOM and
JDSU options. (And I hope I do this math right...)

           9/2                11/8                11/12
 1 AAODS   24-3/8 $2451.50    108-5/8 $10848.50
 2 AAFDF                      33-3/4  $ 6766.00   93-1/2 $18684.00
   QCOM    167-1/4            292                 378

I had a similar rollup with NT around 11/4 and observed the similar kind of further
gain, except I only rolled up the same number of contracts.

I noticed that in both rollups you have doubled up the number of contracts. What
did you base your decision on? Is it more profitable that way?

TMF Elan wrote:
Craig, would you mind sharing more information about your roll-up method? What
is the trigger point? How do you select the new option and how much to invest in
it? You didn't roll out to a farther expiration date. Would you if one was available?
And if so, how would you select it?

Hi Elan and Frank,

Gosh, I'm so new at this so I hope you'll pardon my mistakes...  Remember that I've
only begun options trading a little over 2 months ago, trying hard to apply the
guidelines laid down by the venerable Sparfarkle.  I'm still trying to digest HIS
rules.  Making any of my own seems sacrilegious somehow.  ^_^;;

At the time of the JDSU rollup (Nov 1) I did an off-the-cuff calculation of the
option I had (2 contracts of UNQCE).  It was then about a 4-bagger, and very deep
ITM.  I noticed that it wasn't growing as fast as the OTM options.  I think this must
be some kind of rule, but I probably don't remember the details from any of
Sparfarkle's lectures...sorry.  Or maybe it was a MagicDragon or Rayvt post?

So I decided to roll it up to an OTM option again.  On Nov 1, JDSU was around the
upper 160's, and the deepest OTM option had a strike of 200.  20% OTM was fine by me.

To choose the expiration month wasn't a problem, as I recall.  There was no April
2000 option, so I just kept it as a March 2000 one.  This means I'll still sell to
close after 12 weeks of buying the ORIGINAL UNQCE option, not this new UQDCT one,
since I don't want to get within 3 months of expiration.  And now that Elan forces
me to think about it...  I think if one has a 4-bagger option, then that means the
underlying stock has been screaming hot, too.  Which means it'll still be on the
screens (Relative Strength ones, anyway), so I'd probably like to start another
12-week timeframe.  So if options with expirations 1 or 2 months further out exist,
then I'd go for them.

For the QCOM option, it also reached 4-bagger-dom a week later than the JDSU option.
Since the JDSU rollup worked so well I did the same thing again.

What is the "trigger point"?  I'm sure once you've reached a 4-bagger, it's time.
It may even come earlier, but I don't know how to calculate it other than in real
life.  Next time one of my options approaches a 3-bagger (should I be so lucky), I'll
try to make a comparison with an OTM option.  Well, I suppose "4-bagger" or "3-bagger"
isn't the correct criterion to use, is it.  I should probably use "% ITM" as the
trigger point.)

Now, why did I choose to double the number of contracts?

My thinking went this way...  I briefly toyed with the notion of rolling ALL of
the money up, buying as many contracts as I could, since, in essence, I'd be
leaving all my money on the table if I'd NOT rolled up so why not let it all ride,
baby, ride, bua ha ha!!!

But, alas, I was too chicken.  -_-;;;  (NOTE: If I *had* rolled everything up, I'd
be somewhere in 11-bagger land instead of in a measley 9-bagger ghetto...  OK, OK, my
values have become seriously warped these past 12 trading sessions...  I'll probably
require therapy soon...)

So then, I chewed on the notion of just buying the same number of contracts...

But these were 4-baggers at the time, so just rolling up 25-33% seemed unnecessarily
too conservative...  I mean, the take-home message I kept getting from Sparfarkle's
posts is that you let your (few) winners run, 'cause they'll support all the losers
you're bound to get, right?

So, I ended up "splitting the difference," taking enough off the table to justify
a decent gain even if everything tanked afterwards.  In this way, I'd be playing
with "house money," so to speak.  (Hey, I'm an options newbie.  I wanna gain some
confidence first!)

Of course, the fact I had 6 other option positions that were up an aggregate 100% or
so (and only 1 option--VISX--that's tanking) made this move pretty easy to make.
Amazing what widespread success can do for one's peace of mind.

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