Choice 1: Wait until the stock gets back to $40. May take Years!!
Choice 2: Throw in another $18,000 to buy 20,000 more shares. Your average is $2.76/share.
What if you do not have the $18,000 or the stock drops further to $0.50 after you buy? Better than 1 but Not a good choice
Best choice: Without spending any of your own cash sell someone the option to sell you 20,000 shares of Lucent at $2.50 within 2 years. You will receive $40,000 immediately . you will get to keep the cash if the stock reaches $2.50 at any time in 2 years. You will not lose any cash even if the stock drops to $0.50.
If the stock has bottomed, (A simple test in the book will show you how) you could use part of the cash ($18,000) to buy 20,000 shares of Lucent and have $22,000 cash left.
On 11/29/2002 LU closed at $1.76 and the option you sold for $2.00 are now at $1.40 . You could buy the option back for a profit of $0.60/share or $12,000 total profit and sell the 20,000 shares you just purchased for $0.80/share profit or $16,000 total profit. You have now recovered $28,000 of your $39,100
In fact this is just one of the techniques described in this book that will help you recover your losses while generating cash. --This text refers to an out of print or unavailable edition of this title.
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