Dear Jules,
I'm sure that I wasn't one of the first who you wished to hear from . But, I consider myself one of the ALL. So, here goes.
First, I agree with your assessment on IBM. I believe IBM is vulnerable. I believe that IBM will have the current quarter's earnings downgraded. I did not have this insight prior to its recent downturn.. But, its recent 11 point rise (146 to 157) offers another opportunity to buy puts. Thus, I believe IBM puts are a pretty good idea. BUT, I believe they are a good idea because of the aforementioned. Not, because they offer a hedge or protection for INTC owners.
I could envision the near term where INTC continues to rise and IBM falls. But, IBM's falls may be complete by the time INTC decides to give back 5%. In conclusion, I believe your idea (or Jack's or whoever's) is a good one for the trade itself not as an insurance policy for INTC holders.
As for INTC, I believe it is still in its uptrend (provided that the Fed doesn't raise rates on Tues and the market enters a CORRECTION). My post earlier providing the option that the market may double top right before the Fed speaks, is still open. I uncovered (bought back calls) roughly 30% of my stock on Friday at the open. I expect some announcements of upgrades this week as analysts digest the recent price cuts (or lack thereof). It's still too early to tell whether I was greedy or smart.
As for those who want to consider some protection for their INTC holdings without cross-hedging, I offer the fact that INTC is now up 17% for 1997. A sale of LEAPS (and I don't know how high you can go) seems like a good, sound, CONSERVATIVE way of holding on to INTC and earning a great rate of return for 1997. For me, I don't like selling LEAPS. I prefer to play each month as it comes.
I also don't like buying puts on INTC. I assume that those recommending this strategy are speaking of, say, the Jan 98 130p. I just don't like the idea of spending money for insurance. I'd rather limit my upside by selling calls than spend.
There you have it. No personal attacks. Just a point of view. |
