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Strategies & Market Trends : Action & Options- Taxikid plays

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To: BamaReb who wrote (2658)	11/10/1997 1:49:00 PM
From: taxikid	Read Replies (1) of 4339

longer out and out of the money leaves you less risk like right now the 20s are depreciating-but the rate of depreciation is most likely slower than the 25s- the depreciation real time will eat you up if you see an immediate loss on your purchase- lets say you were buying 10 contracts@ 4 7/8- 4875+comm. the end of the day you have stock at 23 and?? bid 3 1/2- you lose 1 3/8 x 1000= 1375 out of your hide- as of right now. you buy the 25s right now and x10x3/4{try for 5.8} your investment is only $750- like half of what your loss- i used novs cause i don't have time to do a complete analysis- you can see that the higher strike depreciates slower- do the math- 20+4 7/8=24.875 even money @ expiry vs 25+3/4= 25.75 e/m expiry- you risk 20% by buying the OOMcalls the other way you may get tagged hard- why risk 400% more- if it ends up the wrong way you get hurt-much worse- i would not buy any nov calls today. lets say it ends @ 22...expiry you lose 2750 + they will scalp you if you don't exercise- the other way $750 tax loss. i like losing less and gaining more- plus you can buy the 22.5 and 25 and cost avg down so that you would have the same return for less risk but a few$$ more comm. enough said if ya get it good if i made a math error- i did do this real time in my noggin' taxi

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