Trade recap: Gigamedia Ltd.

I purchased Gigamedia GIGM on February 19 for $12.40 a share and sold the March $12.50 call for $.90. The call expired out of the money, thus earning me the call premium.

On March 19 I sold the April $12.50 call for $.85. The stock climbed rapidly through the strike price so on March 27 I bought back the April $12.50 call for $1.77 and sold the May $15 call for $.87. Net cost to me of a nickel plus commissions.

On May 19 the stock was called away at $15. I held the stock for a total of 88 days and earned 27.2% after commissions. That is close to 100% on an annualized basis. The gain is primarily due to the stock price increase and the timely rolling forward of the option.

This stock is very volatile and good use of limit orders on the option trades helped keep the profitability up.

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