Alan answers a question posed by Doug, who asks:
What are your thoughts on the following: Purchased 100 shares of ALXN (Alexion Pharmaceuticals) on 3/15 at $135.18 and sold the $135 call expiring on 4/18 at $5.11. The stock is trading at $140.42 on 4/5 and considering buying a $135 put for $1.05 to protect against a drastic price decline. This seems better than closing the position now. I think adding the put is converting the trade to a collar? Your thoughts appreciated.
It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#160, “ Comparing Protective Puts and Position Unwinding as Strike Moves Deep In-The-Money”
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