Ray, I can't answer for Bilow of course but I can tell you why I employ puts. First of all, the market may generally go up but it definitely has its days/weeks/months where is can go into a terrible tailspin. The bottom last April immediately springs to mind. At the time I had no puts whatsoever and my fully margined account lost some 30+% over a seven week period. Now, instead of timing the market by selling when I think that the market is overpriced I buy puts on what I think are the most vunerable issues. As puts are highly leveraged instruments I only need to commit 5% max of my portfolio value to them in order to protect me in the case of one of those nasty downturns. So, even though you will likely lose money on the put(just like you do on your car/home/life insurance) you do sleep a lot better. If you are one of the good players you can actually make some decent money(so I understand). I do know that Micron Tech puts have been very good to me of late however, I, like Bilow, think that in all probability that these TXN puts are likely to expire worthless. Of course, that doesn't really matter because when they do pay off the payoff is 4-20 times the investment(if you bet on far out of the money puts). Besides all of above, put playing makes playing the market a lot more interesting.-g- And I sleep a lot better knowing that if country 'A' attacks country 'B' thus sending the world markets into a tailspin, then I won't be in such bad shape.
There are some rules to playing this game which enhances your chances and I'm learning these slowly but surely. A good thread to read up on regarding put playing, especially in the tech arena, is the "Ask Michael Burke" thread. I believe that he has got puts on MU, HP, NVLS, ATML, WDC, PRST, GTW, MUEI, and TXN amongst others. Hope this helps. |
