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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe
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To: Uncle Frank who wrote (37)8/13/2001 7:37:09 PM
From: RGM  Read Replies (3) of 1064
 
I don't know if I'm interrupting a dialogue, but I have no problem whatsoever in writing naked put positions at the exercise prices that I would like to own certain stocks at. For example, if the following naked put positions were exercised between now and their respective exercise dates:

ORCL Mar2002 $15 puts - my net cost would be 11.32 a share. I plan to add to this position if ORCL dips below $15; CVS Jan2002 $30 puts - my net cost would be 28.80 a share; LXK Jan2002 $30 puts - my net cost would be 29.12 a share; SMH NOV2001 $35 puts - my net cost would be 33.02 a share; SMH Feb2002 $40 puts - my net cost would be 35.20 a share; AMD Jan2002 $15 puts - my net cost would be 12.70 a share; AMD Jan2002 $12.50 puts - my net cost would be 11.40 a share; AMD Jan2002 $10 puts - my net cost would be 9.35 a share and DCLK Jan2002 $7.50 puts - my net cost would be 6.72 a share.

If a stock gets "put" to me and then trades below the .75 cent lower boundary of its option price, I intend to short this stock in my other brokerage account for the same number of shares that I am long ("boxing it in"). During the bull market, I used to short overvalued stocks. Sometimes they didn't behave, so I boxed it in until the momentum players went away.

My time horizon on selling naked puts is no greater than a 6 - 9 months.

I believe the stock market shall take a significant dip during October from bad economic news or crisis in Japan, so, on certain high beta tech stocks, I may use some of the proceeds from the sale of Jan or March 2002 put to buy a higher price Oct 2001 put if I feel more uncertain about the fundamentals and/or industry sector of that stock.

Rob
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