One might look at Universal Display (PANL) and not like my trade. I was long the shares and nervous into earnings. I had no issue giving up half of the upside move so that I could sleep last night. It is a tradeoff. My cost basis for PANL is $25.71 and my hedge, which is long the March $27 put and $26 put while being short 3 March $23 puts for $1.60 had a break-even cost at $25.70. From $25.70 to $23, I was actually over-hedged against my long shares by a 2-to-1 margin. But below $23, I not only became long my 100 shares again, but also long another 100 shares; however, I would have saved myself $2.70 worth of pain, or roughly 10%. For me, that was worth it.
So PANL is up some $3.20 today and I'm only seeing $1.60 of it on the bottom line --assuming my puts expire worthless and I do nothing with them. Those are the choices an investor often has to be prepared to make. I'd love to have the other $1.60 on the move higher now, but I don't regret the trade at all....228 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.
Already a Subscriber? Please login.