Cyrix 1 Where anything goes Message Board

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Technology Stocks : Cyrix 1 Where anything goes

CYRX 8.760

-0.8%

Nov 13 3:59 PM EST

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To: Investor A who wrote (279)	3/21/1997 7:24:00 PM
From: Crossy	of 640

Fuchi, regarding option trading first I looked at today's chart of INTC. It really looks like on a downward spin. But watch out - the volume decreased sharply from the last days' selloffs. Look for reduced volatility - which is bad for everybody holding (being long) on any options put and call alike because this would reduce their value. (Tip: look at Black Scholes option pricing model, where volatility is one of the most important parameters) I still maintain my short-term TA scenario for Intel. Would be good to sell put options around first week of April. You could even reduce Your risk by adjusting Your option position if yours are too deply in the mony. If you could do intra-day trading and suppose You bought Intel PUTS long 140 April, You could NOW sell them and settle for PUTS long 130 April in exchange and cash in the difference (- or reinvest it <G>) Looking at today's quote from PBS I found out the following landmarks: INTEL (OHLC): O:133 5/8 H: 134 3/16 L: 130 3/8 C: 130 1/2 The problem that also steve adressed in his posts is that if you buy options (long positions) you have to run in order to stand still. The stock has to climb/drop sts. more than 10% for You to generate profits. This is not so easy at all. Also the writer of the option can collect the option premium from You. Also You know that if the stock doesn't move at all, assuming you bouhgt a put at the money you still will loose 100% - your entire position. To overcome this, you have to create "combined" positions that result in little or no time value - that's lost over time. For instance instead of buying INTC PUT 130 now, costing You a large chunk of option premium for options base 130 with no intrinsic value, You could buy an INTC CALL 140 and sell an INTC CALL 130 now , all calls due APRIL In this way You are pocketing the large option premium on the CALL 130 but spending the much smaller premium on CALL 140. If INTC just stays at 130 you would collect the option premium. Loss is limited because if INTC rises more than 140 $, the CALL 140 drops in and rises accordingly. A variation would be CALL 120/140 this is more speculative (less option premium - more intrinsic value). If the stock drops for example 8 points and You did the CALL 130/140 bear spread then normally you could close the position and open another one. However your payout is limited to OPTION PREMIUM - PRICE of upper CALL. Maximum Risk (= loss) is: DIFFERENCE in BASE PRICES minus OPTION PREMIUM plus PRICE of upper call. REMEMBER: with such a kind of bear spread you can make profits while the stock just stays - it doesn't need to drop. And you only have minimum cash margin requirements (just for the differences in base points - because the option pay off diagrams balance off partially one another) Greetings CROSSY

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