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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)
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To: Henry who wrote ()6/20/1999 9:50:00 PM
From: j lawrence  Read Replies (2) of 2241
 
I have a "problem."

I purchased some out of the money August 30 puts when the underlying stock reached a 52 week high of 42 last week. Within a week, the underlying stock dropped from 42 to 31. The puts are 3 1/4 bid, 3 1/2 ask. My basis in the puts are 9/16.

Based on my DD, the company is in trouble. I think that it might drop to 25 or even 20 before expiration. However, the stock is very volatile and some might use the term "pump and dump" to describe the stock. It could easily rebound to 35 this week.

My gut reaction is to sell off the aug 30 options and purchase nov 25s or aug 25s so that I could participate in further drops while protecting a nice 1 week gain.

Does this sound rational?

J
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