Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 226.05

+1.2%

Nov 14 3:59 PM EST

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To: Gottfried who wrote (41338)	1/7/2001 10:20:05 PM
From: Jerome	Read Replies (2) of 70976

Using a leap strategy for a whole years gain in one move. While various thread members have indicated a preference for AMAT leaps one or two years out here is a safer way to lock in some profits. If an investor were willing to settle for an immediate 20% gain on AMAT shares this year here is how to manage it. Based on Fridays close of about $42.00 a share you can write a covered call for January 60's 2002 and get 8 1/4 for it. A miserly return you say. But do the math prior to dismissing this idea. Buy AMAT at 42 and get called out at 60 +++8 1/4. Total return equals 67%. After this past year who would settle for that. Lots of investors I think. The problem with just buying the leap is a number of things. 1)Buying a leap makes the quantum assumption that tech stocks will recover nicely and the market will recover with the economy, and the new President will correct the falling stock prices along with a host of other American problems. 2) Much has been made of Tito's stair case workers on the AMAT foundation. The last I heard was that the stair case workers all quit (they were tired of building stairs going no where in particular) and were immediately replaced by elevator operators who were very accustomed to going up and down a very narrow shaft, on a constant basis. 3)The concept that AMAT always recovers because it has always done so in the past is self deluding. I hope it does, because if it doesn't a lot of stuff I own is going to fall right down that elevator shaft and land with a thud. 4)My new motto will have to be something like, "hope for the best, prepare for disaster". I did meet a man once that did sell covered calls a whole year out. At the time I thought he was crazy, but now I'm not so sure. Jerome

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