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Politics : Formerly About Advanced Micro Devices
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To: niceguy767 who wrote (83475)12/17/1999 6:44:00 PM
From: Petz  Read Replies (2) of 1572896
 
niceguy, I have to agree more with Elmer on this one. He can still make a profit if AMD goes down, but not if it goes down a lot. If AMD goes from 29 to 100 in the next year, Elmer will only profit on about 18 points of that move ($1.50 premium 12 times). But if it goes from 29 to 20 in a year, and never drops by for than 20% in a month, he'll still profit by 18 points. If he bought puts each month during a year in which AMD dropped from 29 to 20, he would probably lose most of his $18 spent on puts.

Having said this, if I really thought a stock was overvalued, I would buy put spreads or sell naked calls, not sell puts.

Petz
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