Jack, I understand you are buying insurance not looking for profits. I, for one, subscribe to the theory that those who can afford to self-insure are better off doing so rather than paying someone to do it for them. That's true in health insurance, auto insurance, home-owners insurance, etc. I carry catastrophic health insurance and pay for the service when I am sick, I carry a decent liability auto insurance policy but high deductibles, my homeowners has the highest deductible allowed.
I would rather sell Mar 145s or 150s if I was of the feeling that INTC and the market were about to correct 8-10% rather than buy puts. I don't trust my timing enough to buy puts at the right time. For instance, I would be out a good 5 points on the 130 puts if they were purchased when intc was at 131 on 1/2/97 (I haven't tracked these options so I am not sure but think so). Now, INTC would have to go down to 135 or so, fast, for me to break-even. That's lousy insurance.
On the other hand, if I were to sell the Mar 150s at 11, I am covered all the way down to 139. I could sell the 145s and be covered even lower. Either way, I still profit from the upside and my timing doesn't have to be as good.
One strategy for one, another strategy for another.
With respect to a pending correction, you may be proven right. I believe we are headed for what could be a double top or simply a resumption of an upward move. I believe a 7% long bond would throw me in the correction camp. Feb 4th could be interesting. I don't think the Fed has to do anything. The 680+M share reversal day is discomforting but by itself doesn't mean much.
Good night. |
