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Strategies & Market Trends : The ultimate play:STRADDLES on earnings announcements.
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To: farouk a. hassieb who wrote (28)7/9/1996 12:59:00 AM
From: Andy Chen   of 140
 
here is something you might want to try...this is a spread strategy that
has worked well for me.

if USRX bounce off the 78 support (I assume you are looking at 80/share
as a good confirmation). buy july 85 calls. and simultaneously, buy the
stock and sell july 80 calls as a way to protect yourself.

good scenerio--
when stock reach the resistance level, sell the july 85 calls. and wait
for the price to drop. once the price is down to 80-81. close out the
hedge position. if price doesnt drop prior to option expiration, you win
on the hedge position as well.

bad scenerio-
if the stock drops from the 80 dollar level and break the 78 support,
I will sell the stock and July 85 calls and go naked with the short position
in july 80 calls until the stock reach the lower support level.. if you want
more protection. leave july 85 calls open as a way to protect your naked position.

this strategy relies heavily on your technical analysis. i hope you are right
about resistance/support levels.

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