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Technology Stocks : Applied Micro Circuits Corp (AMCC)
AMCC 8.4500.0%Feb 3 4:00 PM EST
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To: SJS who wrote (268)12/22/1999 2:55:00 AM
From: Trader Dave  Read Replies (1) of 1805
 
AHA! you've discovered the options bandits! Given amcc's volatility, it's no surprise you can't get an execution in the middle.

If you want to play that kind of strategy, you MUST analyze it as if you buy at the ask and sell at the bid.

I've found that it even gets worse if you try to do it with any institutional class quantity in options. The ONLY time I've seen execution in the middle is placing an order with Morgan stanley or Goldman for very large quantities of contracts and even then it's depended heavily on WHAT underlying security. (For instance, for some strange reason, clarify options always seemed underpriced and were easy to get without disrupting the market while mercury interactive options always seemed expensive and are about as liquid as molasses in the minnesota winter.)

Forgetting the spread, the premiums should be quite high given the market and amcc's recent volatility, but more importantly the behavior should be even more unusual given the overhang of the upcoming secondary.

My lesson of 1999 has been "don't write covered calls." So I've stopped messing with it, seemed conservative, but when you have 1000 percent losses a few times when you don't want to sell the underlying common, it cures you quickly. It would seem to me that covered calls and super high growth (mixed in with a frenzied and irrational bull market) don't mix.

That spread doesn't make tremendous sense. $13 for the 115's and $6 or so for the $130's? I'd rather just be long the 115's and wait or not play at all.

TD
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