No need to get crazy protecting a long position in Carrizo Oil

A large percentage of my trades involve the use of Options either as the trade itself or in conjunction with stock. One of the most common positions you will find in my portfolios is the Covered Call. This can be done for income, protection, or for leverage.

Today I thought I would highlight the reason of protection. I am currently long $CRZO (entry at 27.46) and I sold the June 27.5 Calls against the long stock on 5/20 for 1.76 giving me a range of 25.7 to 29.30 to work with.

CRZO_June_27_5_CallA simple approach to providing protection to a long position. Today price is hovering near my entry and this short Call is now OTM (out of the money) so no risk of being called away now.

Some of the math:

Long stock at 27.46 & collected premium of 1.76 so this gets me the downside target of 25.7 that I need to manage. Being long at 27.46, short the strike at 27.5 plus the 1.76 gets me the capped target of 29.30 above.

One thought on “No need to get crazy protecting a long position in Carrizo Oil

  1. Pingback: Position Updates – 05/24/2013 | 1nvestor

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