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Strategies & Market Trends : Advanced Option Strategies
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To: OX who wrote (279)1/27/2000 8:56:00 AM
From: tyc:>  Read Replies (1) of 355
 
As a neophyte straddle writer, here is how I would plan to play DELL this morning;

1. Sell TWO 45 straddles at least 3 months out.

2. Short sell 100 shares of common. The purpose of the short is to capture a profit IF the stock goes lower; the chart is weak. This hedge will be lifted as soon as Dell's stock price moves above a Bollinger band drawn 1SD from the 50-day MA. My hope would be that early lifting of the hedge would assure that it will not lose money and detract from the value of the straddle.

3. If Dell recovers (or should I say when it does), when a six-bar RSI crosses the 50% line confirmed by a strong MACD, buy 200 shares of stock. The stock is now considered to be strong so the aim is to make money on the bull side.

4. When Dells price crosses the line 1 SD above the 50 day moving average, BUY calls in addition to the common; the stock could move up a long way from this position.

5. When Technical indicators suggest that Dells price is weakening, sell the common but retain the calls. With the protection afforded by the calls, I might even short the stock depending on technical indicators.

This strategy IMHO would not delimit profit potential except to the realms of reality.

P.S. How do you get a quote on Dell Options ? !!
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