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Strategies & Market Trends : Options
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To: Poet who wrote (2812)2/11/2000 10:43:00 PM
From: PAL  Read Replies (1) of 8096
 
Hi Poet:

I like synthetic long. As you see in buying calls, you have to fund it with cash. I prefer not to use my hard earned money (even though sometimes it seems it was easy money), so I have to find a way where to get that money. Selling put is one way to do it. In the case of MSFT, it is a pure gamble, LV style. As you know there is no repair strategy if you own calls. Either the option is ITM or OTM. If the latter, all the money is gone. Funding with put option that expires in February yield small premium. therefore, I chose march expiration for JDSU/200 put option. $ 18 7/8 per contract (it even trades higher after I sold it) vs $ 1 1/4 per contract for MSFT/105 calls.

If those calls becomes worthless, so be it. I just have to cover that loss with profit from selling the put option.

Next time I will show why sometimes it is advantagious to take next month expiry versus current month. (such as why march over feb expiry).

Best to you.

Paul
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