Advanced Micro Devices - Moderated (AMD) Message Board

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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 243.63

-3.4%

9:41 AM EST

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To: TechieGuy-alt who wrote (104131)	10/30/2003 1:29:06 PM
From: Petz	Read Replies (1) of 275872

re:<short 1x Jan 15 puts and buy 1.5x Jan 17.5 calls> You can basically get about 2.5 to 3x the leverage from this strategy than you get by buying the stock at 50% margin. For a given amount of capital, your loss (if stock goes to 0) could be about 2X larger, and your gain 3X larger, than just buying the stock. OTOH, there's no chance of loss if the stock is above 15 at expiration. Most brokers will require margin equal to 25% of the stock price to sell the short puts, so thats a factor of 2x. Its 3x leverage because you are buying 1.5 times as many calls. Buying stock outright is a better choice if the stock goes down or stays below 17.5. If you do implement this strategy, I recommend that if the stock starts appreciating, you sell some of the calls and buy back some of the puts. Petz

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