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Strategies & Market Trends : Option Spreads, Credit my Debit

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To: KFE who wrote (1917)	1/19/2001 2:57:48 PM
From: KFE	Read Replies (1) of 2317

Just exited the remainder of the HAND spread for a net double. Sold the Feb 30Puts- the Jan30Puts will expire worthless. The stock didn't move in the direction anticipated and was basically unchanged but the return was 100% in less than one month. The IV on the back month held up after the earnings announcement so if the stock had moved to the short strike price the return would have been 600-700%. This was an exceptional risk/reward but it shows the potential risk/reward available by trading horizontal skews. Some option books discuss trading vertical skews but I can't recall any discussing trading horizontal skews. I guess you could look at this as a positive thing because if more people did it then there would be less opportunities. One nice looking setup to watch is DELL Supposed to report earnings just prior to Feb expiration. IV is at the low end of recent range. Some skew is already present. Great liquidity-could be done in size if desired. Will be monitoring next week when March series starts trading.

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