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Politics : Formerly About Applied Materials

AMAT 334.86

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11:08 AM EST

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To: daryll40 who wrote (42290)	2/16/2001 2:14:18 PM
From: mitch-c	Read Replies (2) of 70976

Precisely my logic in grabbing some puts . Feb 47.5's bought yesterday @ .25, sold just now @ 1.00 to 1.25. With commissions, about a 3.5x move, 250% ROI. (It doesn't always work that nicely.) However, I limited my exposure by only throwing a few hundred bucks at the problem. Small pain, small gain. <g> IMO, the differences between shorting and buying puts are these: 1) The options are usually cheaper; you can leverage more of them for the same cash (of course, with more associated risk). 2)Unlimited loss potential for a short (you can lose more than you have); Losses on a put can go to 100%, but limited by what you paid for it. 3) A short position has an unlimited time horizon; with a put, you're guessing at both a move and a timeframe, thus assuming more risk. 4) Options spreads are wider than on the underlying stock; however, price volatility over time usually makes the spread irrelevant for either. - Mitch

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