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Strategies & Market Trends : The ultimate play:STRADDLES on earnings announcements.
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To: farouk a. hassieb who wrote (45)7/24/1996 1:47:00 PM
From: Chris Baker   of 140
 
Farouk

I buy mostly Put-Call combinations rather than Straddles. I have long-term calls (Jan. - Feb.) on IOMG, CSCC, FORE, PAIR, ASND, and BBTK. I also have August Puts on all these.

I adjust the puts on market conditions - selling some when the stocks falls off and buying back when the stock comes back. I want to limit or neutralize my short-term losses while allowing for large gains on the long-term calls. (In some cases like IOMG the Puts gain more than the long-term Calls lose.)

I have only been doing this for a short while and in fact my entire short-term portfolio is in options. Thus far this has been working well for me - I'm basically immune to the market sell-off while trying to catch the bottom for some longer-term profits. Any comments on this strategy?

As I see it shorter-term both the Nasdaq computer index and Microsoft tested but did not break through last weeks lows this morning. This was very significant and should this continue I'm thinking this will be at least a temporary low (one or two weeks) for the computer stocks and related software stocks. Fund managers may be buying when they think a low will hold for a least a week or two, figuring they can sell at higher prices should redemptions come in.

However for the netowrk-communications stocks at least CSCC broke through last weeks low, so I'm expecting retesting of lows for the networking and communications stocks.

Today I bought back some puts that I had sold yesterday and also used August Puts to cover some long-term calls on CSCC and PAIR that I bought yesterday afternoon. More economic data tommorrow and Greenspan testifying at 10:00 am will likely create jitters.

Any comments on all this?
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