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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 203.14-0.8%Jan 9 9:30 AM EST
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To: Goutam who wrote (5626)8/18/2000 5:11:15 PM
From: Gopher Broke of 275872
 
Hi Goutama,

I didn't pull too much back on those options (got out for about $14K as compared with the $5K last week so a net loss of just under $400K) but I am not unhappy with the current situation. My approach to options is that they are just like buying on margin with a higher premium but with much greater leverage and without the exposure to margin calls. I tend to buy near or in the money to reduce the premium (hence my larger losses on a worthless expiry) but also on the basis that if the fundamentals remain solid then I buy back in. Effectively the loss can be rationalized as just a "paper" loss - if I had held the 25,000 AMD shares equivalent to the options that expired then I would have been sitting on the same paper loss on those shares.

Following this principle I purchased 120 AMD Jan 01 and Jan 02 calls last week at strikes of 50, 60 and 70. I am up $66 K on those already. When AMD hits $100 I will have recouped all my paper loss. So my "virtual cost basis" has moved up a bit, but I remain very confident that AMD will come good for me.

Incidentally my "paper loss" was all out of gains on AMD options, gains which I would not have achieved without taking risks. I was still up about 150% for the year at the bottom and am now back to 200% with plenty of running left in AMD, so things are looking pretty good again. Bit stressful for a while though :)

Thanks for your interest.
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