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Strategies & Market Trends : Tech Stock Options

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To: Nancy who wrote (6476)	3/26/1997 4:35:00 PM
From: Loren Winzeler	of 58727

I failed to mention in my subsequent post that is was a backspread, or reverse the traditional spread. A call ratio backspread sells the lower strike and buys additional calls at cheaper prices at a higher strike. Usually, if the premiums are low, the backspread can be established at a credit. There is no downside if the stock moves below the lower strike (in this case, a bad reaction to fed meeting). The maximum loss at expiration is if the stock finishes at the higher strike, or Apr 140 for Intel. Did a quick net search: rcmfinancial.com "Reverse Strategy: a general name that is given to strategies which are the opposite of better known strategies. For example, a ratio spread consists of buying calls at a lower strike and selling more calls at a higher strike. A reverse ratio spread also known as a backspread consists of selling the calls at the lower strike and buying more calls at the higher strike. The results are obviously directly opposite to each other. See also Reverse Hedge and Ratio Write. " options.netstations.com This site shows the graph. Cheers, Loren

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