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With the recent volatility against ISRG, the stock options are pretty expensive. With the beat down in price, this would be a great stock to sell covered calls against while we wait for the stock to go up, or simply smile with a nice gain....

Looking at the current stock price, we see them not much above $120. The Jan 2010 covered calls are selling for just over $30. So what does this mean for Fools? Glad you asked...

You buy the shares for around $120, sell the covered calls against the stock with a strike of $150 (Jan 2010 date) and pocket the $30 and wait... one of two things happens... either the stock rises, and you get called, giving up your shares for a 50% gain in 13 months ($30 added to the strike price from your buy price, and $30 for the options... total of $60 which is half of what you paid for the stock) Sweet...

If the stock stays flat, and doesn't go anywhere, or goes down, you get the shares for a cost of $90 ($120 buy price minus your options)...

For those of you that like me that have followed ISRG, this seems like a great deal either way...

Now for the actual PRO portfolio this may actually be to long of a timeframe, so it might be wise to look at expiration that is closer... the Jan calls with a strike of $130 are going for $15ish... that would give you nearly $25 a share against a price of just over $120 in only 2 months... which is just over 20% (an annualized gain of 120%)...

Chris
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Chris - I haven't followed ISRG. Took a quick look at the chart and it seems to have significantly underperforming the the sector the last couple of months. Must be something else other than general market malaise having an effect.

It dropped from $300 to $120 in a couple of months, what's to stop it from dropping to $50 or lower. That would put a pretty big dent in the strategy you outline.

Ed
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Ed,

Check out the companies fundamentals. It really is a great company. If it drops to $50, you keep your shares at the $90 basis, find something to sell to get some cash and buy more.
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The fear is that the downturn will cut into hospital capital budgets, and there was a recent analyst downgrade for that reason. On the conference call, ISRG said they expect more leasing.

No doubt about it, hospitals were already drowning under indigent care and managed care ("negotiated" rates). State and local budgets are hurting, and they probably can't expect as much from benefactors/endowments/whatever.

I went the other way. I sold my 46 shares and bought the Jan 2010 120 call. Of course, like everything else, that seemed like a better idea a week or two ago. Nevertheless, I hope to be exercising in-the-money calls eventually.

My wife just had her second DaVinci procedure. Both were closed-chest "wedge resection" of the lungs, left lung in August and right lung last week. Wedge resection is basically removing a wedge of lung tissue and stapling the edges back together to close the gap.

I wrote some more about the surgical details here: http://boards.fool.com/Message.asp?mid=27193445&sort=who...

Personally, I think the market is underestimating the growth in new types of procedures as surgeons gain experience, but they may be right about delayed purchasing.
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I should explain that I will have an unusually large tax bill in April so part of my motivation for trading the shares for the call was freeing up some near-term cash instead of adding to the position as I would like to do.
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Check out the companies fundamentals. It really is a great company. If it drops to $50, you keep your shares at the $90 basis, find something to sell to get some cash and buy more.

If ISRG got to 50 I would probably break my own rule of adding more $$ to my brokerage account. ISRG is a game changer.

My only long term concern with ISRG is that eventually, competition will show up. But right now they have a huge moat.

Don't currently have a position in ISRG, probably time to start and not worry about if I catch *the* bottom.
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Yeah, at $50 I'd have to get pretty busy on Ebay so I could back the truck up.
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i don't own isrg but would like to so what do you all think about writing a put?

JAN 110 $10.97
difference is 16%
trade's break even price $99
option premium payment 9.6%

if the shares don't trade down to 110, can rewrite and try again. the premium is still great.

aside from missing on the upside, if the stock surges up, am i missing something? i'm new to all of this...thanks
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