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Strategies & Market Trends : Options
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To: RoseCampion who wrote (651)1/4/2000 6:42:00 PM
From: cthruu   of 8096
 
Hi Rose:

This is a nice explanation of spread vs. call. Here is my two cent's worth:

All strategies have their places and advantages. In sideways market, one may want to write covered calls. In slow trending market one may prefer spreads and in strongly trending market simple call/put buying will be more attractive.

Writing options and creating spreads have limited profit potential. Because of this reason I prefer simply buying calls/puts. If the premiums are expensive, synthetic strategies work quite well. Often those expensive premium options end up being the most profitable when traded for a very short time.

For example, if I put in a bull put spread, I often supplement with ATM call. This strategy, when placed with minimum debit or often with credit, has limited risk and unlimited profit potential. The calls are simply followed with trailing stops and the spreads expire or are rolled up. Reverse is true in bear markets: a bear call spread and buying puts. Of course, there are three commissions involved.

I have not been able to project future profits on my option plays: only the risk.

Regards:

Girish Patel
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