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Strategies & Market Trends : The ultimate play:STRADDLES on earnings announcements.
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To: Avi Halpern who wrote (55)7/31/1996 11:17:00 AM
From: Chris Baker   of 140
 
Avi - Thanks for your insights

I've learned the hard way there is no easy money to be made in this market. It's really too early to tell how well these 6-8 month calls are going to work. Mostly I'm posting here because more options buyers should look at them, as the implied volatility on August-September options is very high right now.

The reasons I switched to spreads is simple: On the first big sell-off about two weeks ago CSCC and PAIR both fell dramatically until about 1pm. My timing was good and around 1pm I went in to buy current-month calls on CSCC and PAIR. Because of implied volatitlity the Calls were very expensive AND the MM's raised the bid-ask spread to ONE DOLLAR on CSCC Calls with current month expiration!

Even though my timing was correct, the Call optons were priced so that it was difficult to make a big profit on the rebound. So I decided to reverse my stratgey and hold 6-8 month calls while planning to possibly sell some previously purchased short-term Puts on market sell-offs. This way I gain from the market volatility instead of having it work against me. To save on commissions and the bid-ask spread I buy long-term calls which I don't sell.

I'm bullish on the market as long as interest rates do not go much above 7%. The period bewteen August Option Expiration Week and mid-September could see retesting of recent lows.
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