1) During this viewing period, Merrill trades in an uptrend
from late June 2003 at a price of about $45.00 through January
2004 with a high around $60.00.
2) This is a wide trend with some intra-month ranges as much
as $5.00 and $6.00 wide, indicating a volatile trend.
3) There were a few gap openings early on in the uptrend during
July, but we also want to look at the large intra-day ranges,
displayed by the length of the daily candles.
4) The stock also deviates frequently from the mid-line of the
trend and although it stays within the trading channel nicely,
this still is a volatile trading pattern.
Conclusion to this stock options advice: With volatility high,
option premiums will probably be expensive. What you should
take away from this stock options advice: the investors should
look to obtain maximum protection, but the protective put would
not be the best choice.
Although the stock is very volatile, the uptrend is not a steep
one. During the observed period of 6 months, the trends mid-line
capital appreciation is only a little more than $6.00, not much
compared to many other stocks during this period. With the high
volatility, the price of a protective put for any length of
time would quickly eat away any profits from the stocks rise.
After taking this stock options advice
into account, you should
realize that a collar would allow the investor the protection
needed, at a reasonable and warranted cost, to justify the potential
reward of the capital appreciation.