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Strategies & Market Trends : The New Bull Market.

RMBS 97.25

+1.0%

2:29 PM EST

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To: GROUND ZERO™ who wrote (808)	6/21/2002 11:04:01 AM
From: Chip McVickar	Read Replies (1) of 1750

I'm listening GZ... The premise behind taking the gold call option so far out of the money was three fold: One... I expected short sellers to be forced to cover, and gold companies to begin unhedging. Two... I wanted time for the position to unfold, and at a cost effective price for the speculation, with little downside risk if I were wrong. Three... the dollar would be falling allowing gold to rise. So Far I've been right....! Oct GC02v is at 325-6 All of these conditions have been met, and to some extent what I expected has just barely started to unfold. Would have to check the bid/ask, but I believe there'd be a small profit. The kicker..., this option, now in the money has the potential to grow very quickly in value as buyers bid for this scrumptious cookie.... and produce some serious appreciation. At least that's the theory. <smile> The sneaky shit comes in with the time premium, at some point and it's no longer a good trade, with about 85 days to maturity there's got'ta be a pivot point at which the combination of price and time make the speculation a loser. So far price and time have kept this contract profitable, but as you say if gold stays here between at 320-330 for the next 85 days...""...you could be right about market direction and still lose in the trade....." My inclination is to keep it awhile longer, but that might be until next week.

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