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Technology Stocks : All About Sun Microsystems
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To: Sonki who wrote (20915)10/9/1999 2:21:00 PM
From: Alok Sinha   of 64865
 
I did sell the Oct 95 puts (a little early but still with a 150% gain in 2 days), but did not buy back the covered calls. There is a good chance it will expire worthless. Typically, the realized gains on the puts offset any paper losses on the underlying stock, so the overall portfolio value is conserved. I think of it as a form of portfolio insurance. But I do not buy long term puts on my underlying stocks for two reasons : (i) premiums are high (ii)if I thought that the stock was going down long term I wouldn't hold the stock.
It is only when the stock pops up 10-15% over a few days due to investor enthusiasm or short covering that I buy short term puts to benfit from consolidation and profit taking.

Regional banks look excessively undervaled (I bought some FTU jan 40 calls last week, which has since doubled), but with the rising rate environment I don't think a big rally can occur. But the PEs in this sctor are unreal (< 10). I guess you can sleep better with those stocks, as I don't think there is much downside.

Regards

Alok
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