Options 201: Beyond Obi-Wan-Kenobe Message Board

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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe

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To: Dan Duchardt who started this subject	7/16/2004 10:37:59 PM
From: jt101	of 1064

Hi, Sometimes I wonder, which of the following two strategies is better. To me they both look similar, but I am more comfortable with the first strategy. Is the first one really better OR, it is just that my brain not functioning properly? For the sake of example, say, I am bearish on Countrywide Financial CFC. Today it closed at $72.37. 1) I short the stock and buy Oct 65 calls against it for $9.60. I prefer to buy ITM calls with less time premium. This requires the stock price to move down a lot, for me to earn any profit out of it. This allows me to leg in-and-out of stock position very easily, without losing premium every time like in options. I don't have an answer, but I wonder, how often the broker can force me to cover the short without letting me know in time? 2) Just buy Oct 65 puts for $2.10; This has fewer transactions and requires less capital. To me second strategy looks simple, but for some odd reason I prefer first one. Can anyone help me? Thanks... Edit : By mistake I posted it on the other option thread, which is less active than this thread.

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