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Technology Stocks : All About Sun Microsystems

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To: JC Jaros who wrote (39514)	12/20/2000 1:16:58 PM
From: contrarios	Read Replies (1) of 64865

JC, You might want to consider a Bull Call Spread on the Jan '03 SUNW LEAPS. You can limit your risk using this strategy and increase your gains. For example, buy the SUNW Jan '03 35 Calls, sell the SUNW Jan '03 50 Calls for a debit of about 3 1/2. The Jan '03 35 Calls will increase at a faster rate than the 50 Calls as the price of SUNW increases. If, in Jan '03 or before, SUNW trades above 50, your spread will be worth up to 15. That's over 400% gain. Your downside is also protected by the short Jan '03 50 Calls. If SUNW price falls, both option values fall but your spread price falls at a slower rate than if you had straight calls. Other spreads higher up the strike price can be placed for less debit giving a much higher % gain but the stock has to reach a higher strike to attain those gains. You get two years to be successful on this trade and your breakeven is 38 1/2 for SUNW in Jan '03. So you have to ask yourself, will SUNW be over 38 1/2 in two years? Will it be over 50 in two years? Personally, I'd make this trade. The risk to reward is very good. This is the safest way to play options. Vinnie

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