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Politics : Formerly About Applied Materials
AMAT 260.77+0.2%Dec 24 12:59 PM EST
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To: t36 who wrote (12825)12/9/1997 5:29:00 PM
From: Tito L. Nisperos Jr.  Read Replies (1) of 70976
 
Sue,

AMAT is not as volatile as a few weeks ago so that short term traders have to put up more money to get the desired return. For Options traders, they probably are using 20 Calls instead of 10 each time.

Let's take an example:---10 Calls of ANQAG Jan 35. The Option traded as high as 3 3/8 and as low as 2 3/16 today while the stock traded as high as 35 11/16 to as low as 33 3/8 (about 2 dollar spread). Assuming One has bought the Option previously or One has the stock and wanted to Write (sell) an Option:---he could have sold 10 Calls of the Option at 3 and bought back at 2 1/2 for a 1/2 gain or 500 dollars. That's a day's worth for a 3000 dollar investment. What if the stock slides some more tomorrow to approximate the low set 4 days ago at 32 1/2---he would be gaining probably a dollar/sh or 1000 dollars on the Option...Then when he thinks the stock hits bottom (by tomorrow or another day), he could buy another Option then wait for the stock to go above 35 (or less whenever his profit objective is attained)---as the stock is on its way Up to complete the Yoyo swing that started today.

If you try this strategy, use Options that have a long way to expire like the APRs, JULs or LEAPs; JANs loss time premiums more quickly compared to the longer ones, as they near expiration.
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