How does the stock repair strategy work?
First of all, this strategy will not work for all stocks all the time. If you have one of those dead.com stocks that dropped from $234 to 18 cents, ask your broker to send you the stock certificates and try to auction them off on eBay. But if your stock has dropped less than 20%, this strategy might work for you. Usually, the best it will do is get you back to breakeven But thats not so bad. Let’s say you own 200 shares of a stock that’s now at $58 a share. You bought the stock for $75 so you have a $17 per share loss on the investment. To get back to breakeven, you would have to wait until the stock goes up $17. To use the stock repair strategy, you could buy two call option contracts (100 shares per contract) at a $55 strike price andsell four contracts at a $65 strike price for a credit of 50 cents a share. That means you put $100 back in your pocket today when you set up the trades to repair this stock. Because the options leverage your current position, the stock only has to goup
