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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)
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To: ---------- who wrote (348)9/22/1997 3:23:00 PM
From: Randy Schmid   of 2241
 
Doug - thanks very much for the thoughtful reply. I hadn't considered the sell call/buy put db/cr = 0 approach - that's a new one to me.

For me, this whole issue is one of finding balance. If I cap off upside profit by selling 55s (which would net me about as much as I paid for the 47.5s, thus profit would be (750 + 450 - 450)/450 for 166%), but with no downside protection, as your put would afford. Still, I doubt AGPH (you should all head over to the thread) is going to do much but maintain its ascending highs pattern, so the judgement comes in the form of where to cap off the spread, and when. I'm finding there's sometimes no room between fear and greed in options.

For now it looks like the choice will be capping at 55 or 60 if AGPH keeps rolling (European approval for HIV Protease inhibitor Viracept anticipated, record earnings and rates of sales increase continually outstripping analysts estimates, plus LOTs of short interest); with some time value left, I might be able to get my original money out and enjoy $1250/contract; I've also bought some Feb 55s recently, to continue the ride.

Strategic tips always welcome. I am a beginner. Love this book by McMillian - learned stuff in one evening it'd take me months to figure out.

Regards,

Randy
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