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Strategies & Market Trends : The Millennium Crash
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To: Little Abner who wrote (308)8/18/1997 6:58:00 PM
From: Bilow   of 5676
 
Too all: I forgot to mention that stocks used to pay dividends,
and people held them for that reason. As far as margin requirements,
that extremely speculative part of the 1929 market has been
replaced by the extremely speculative options market. The
mechanics are a little different, but the end effect is the same.
You get to "control" a lot of stock with a little investment. You
have to pay a lot of interest/time premium for this priviledge. While
margin calls will force you to sell your marginned stock for a
complete loss, similarly a market decline will make your option
worthless also for a complete loss.

I keep swearing off options but then I go back to them. Right
now I've got puts on the XCI (computer) index. I'd like to get puts on
the SOX (semiconductor) index, but I haven't figured out how to
make Schwab sell them to me.

If you want to read a fascinating book on the what distinguishes the
stock market from a random gaussian process pick up a copy of
Fractal Market Analysis, by Peters from Wiley. I couldn't put it down.
It has particular applications to the probability of large market moves
and in particular the pricing of options struck far from the underlying
security price.

Glad you guys liked the post, I'd like to hear some long-winded
ideas from you guys too.

-- Carl
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