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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: Zeev Hed who wrote (104)10/10/2001 11:09:46 PM
From: mishedlo   of 99280
 
Zeev - I can make a case that options are very conservative if one does it right.

Right now with VIX VNN high, most options are pricey.
But QQQ calls seem more reasonable.
Why not some QQQ calls a few months out. Sure wish I did that at the bottom and sat on them instead of trying to trade these whipsaws in individual equity positions.

The reason I prefer calls is I know what my exposure is.
For 8,000 I can buy 20 DEc 31 QQQ calls.
Those are 1 1/2 points in the money. On could risk
Equivalent purchase of QQQ would cost 64,000.
Should absolute panic hit one could lose 8,000 on the calls, or maybe 20,000 on common. I am not sure what would cause a drop of that magnitude but it is possible. If we went sideways for 3 weeks then one would be flat on the common and down perhaps 1000 on Calls. One is paying 2 1/2 points of time for the luxury of staying in cash but that could be worth it to someone like me scared to jump into whipsaws on individual issues. On an immediate drop of say QQQ points tomorrow, one would lose less with options than with common (but a higher %).

I wish I had enough sense to jump into QQQ calls on the bottom as I probably would have a double.

Where people go astray is buying stuff too far out of the money, or not giving themselves enough time, being concentrated in one sector. Mistakes I have made time and time again.

Looking at options chain I still think either weakness or explosion up into options expiry. We will see.

M
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