Robbie, Took a first third in my usual way. The only break with that was my full position purchase of Mexico Fund calls about 15 days ago. And the only reason for the change was that closed end funds don't have that much risk or reward, so it was a quickie 150%er and not one of my searching for quadruples trips.
I am not much of a believer in protective puts. Basically, to own a stock and buy a protective put, you are basically doing the same thing as buying a call and holding cash, which is the more efficient trade in commissions and friction. However, there are often tax reasons for a synthetic trade.
I agree that Cisco, all the internut stocks, and many other trading sardines have huge premiums on their puts and calls. One way around this that is not completely satisfactory is credit bear spreads: i.e., selling an at the money or in the money call and buying an out of the money call. The extra premium provides a modicum of protection while you have a long position to prevent you from giving up the stock. This position with a long stock is known as a spread conversion and I do lots of them in my income portfolio. They allow you to take advantage of the high premiums rather than letting them take advantage of you. However, if Cisco goes to $12, they aren't much comfort. <G>
Other than that, I buy out of the money puts not as far out as your jan 2000 contract. For example, most of my current puts are in the April-June time period. That lowers the premium and takes in the most dangerous season for tech stocks.
MB |
