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Strategies & Market Trends : The ultimate play:STRADDLES on earnings announcements.
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To: Linda Brandt who wrote (4)6/21/1996 11:22:00 AM
From: farouk a. hassieb   of 140
 
Linda,
It's true that certain stocks like USRX and PRST have very high premiums but this is because the beta of the stock is built in to it.
Remember it takes money to make money. I like to play earnings announcements on "story" stocks that have been hyped up. One strategy that has worked quite well is finding a company that is planning to announce their earnings near to options expiration(where the premiums would have fallen to realistic prices) and buy an on the money straddle for that month. This is very risky and you must pray for stunning earnings or a big disappointment. HWP back in FEB announced earnings on expiration day, the HWPBR calls were asing 5/8 the day before with HWP at 86.5. If you can remembet, HWP announced great earnings and went up to 95 that day which would have made you almost 10 times your money at the close of the market. The85puts were trading around 1.25 and would have expired worthless obviously, but I didn't care. The point is you don't want to have to pay more premium than you have to but you are taking a bigger risk by not. The next play is SUNW which announcing earnings in july I believe the day before OExp. Glad to help. Write again. PS:IOMG is a great options play. so is ASND,NSCP,CRUS(if you think the semis will rebound off support this is easy money, the stock is trading at 17.75 with STRONG support at the 17-17.5 mark. Why not buy longer term 17.5 calls and ride the bounces up but if it breaks 17, bye bye.
Farouk
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