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Was there any guidance given on the Oracle Diagonal? I just looked at the What to Do Next memos and didn't see anything.

-Mick
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Hi Mick,

I got some thoughts from Billy on this one. He notes that the fair value estimate for Oracle is pretty close to the current price, and that it is listed in Tier 2, indicating good expectations for North Star returns over the next three years.

He says that once the short call expires next week, it would be reasonable to re-up it with a new near-the-money call, looking to go 3-4 months out. You could keep doing that so long as the price of Oracle stays relatively stable or slowly appreciates, until the expiration of the 2020 owned call.

I'm doing this diagonal myself, and that was my basic plan. I might hold off immediately after expiration to see if the price gets closer to $50 in the next few weeks, which I think it could given recent market volatility, but one never knows. Even though it is down right now, a few more written calls at the current price level through Jan 2020 could bring us a nicely profitable position overall.


Would be nice to get another buck or two on the stock, though, before reupping the next one at a $50 strike.

Toby
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Hi Toby

I am thinking about taking a tax loss this year on the long leg of the ORCL diagonal. I am considering rolling to 1/21. That is probably more attractive than the alternative of selling the long leg this year, the short leg next year and then possible restarting a new diagonal.

Any thoughts?

Adriaan
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Hi Adriaan,

Sorry for the delayed response. You have the 2020 long call currently, right?

If you really need or want the tax loss, you could consider that. There may be some wash sale issues involved here. (I personally would not treat it as a wash sale, but rolling a long call with lots of time left to run for another long call is probably a closer case than rolling an option about to expire, so you'd want to consider that angle and maybe talk to a tax expert.)

But tax issues aside, I'd personally not be inclined to roll early. All you are really doing is incurring unnecessary commissions and trading costs (you're going to lose a bit on the spread on each side). I'd just wait till next year when the call is close to expiration. I try to let my long calls go as long as possible.

Another point, that your post seems to touch on if I'm reading it right. I would definitely not sell the long call and leave the short call open for any length of time. You open yourself up to significant losses on the upside if Oracle suddenly decide to post a big gain for some reason. So if you do anything with your long call, I'd either immediately replace it with another long call, or close down the short call at the same time.

Toby
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Thanks for the the advice. As things are now there are several opportunities for tax loss harvesting. This may not be the most attractive one. I need to look at my portfolio again!

Adriaan
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The 52.5 written call for ORCL looks like it is expiring as worthless, unless Oracle jumps over that amount today which is unlikely. Therefore, we shouldn't have to touch that position
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