Your advice is correct. I'm planning on keeping these options
only for a couple of days. At most, say, a month. (giggle)
DELL was 64 3/4 when I bought this morning. It rose during
the day, then fell near the close. I put a market order in, and
as usual, the MM got me in at a high price: 3 5/8. But they
closed at 3 3/4 bid, so I'm doing okay. But that is a lot of
time premium for a two week option.
My experience with options is that even if you do manage
to predict the movement and the direction and the time,
you still don't make as much money as you expect due to
the loss of time premium when an option goes from near
the money to deep in the money. If I keep to expiration,
DELL has to close at 61 3/8 for me to get my money back,
and that is not terribly good odds.
I had CPQ puts that did okay this past November. If there
is a secret to surviving on puts in an mania market it has
to be timing and avoiding greed.
But anyone who buys a newspaper would have been able
to see the reduction in ASP of boxes. The implication to the
industry when it has already approached saturation of the
US market is clear. CPQ in single digits, Dell in the teens.
I'm going to start trading the market with a Nasdaq level 2
feed in April, and then I will be much more comfortable going
short. That eliminates the time premium problem, the nasty
spreads, high commissions, and the illiquidity of the options
market.
-- Carl |
