Y2K (Year 2000) Stocks: An Investment Discussion Message Board

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Technology Stocks : Y2K (Year 2000) Stocks: An Investment Discussion

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To: Nanda who wrote (11230)	4/27/1998 11:06:00 PM
From: paul e thomas	Read Replies (2) of 13949

CONTEMPLATING COMPLETE CHANGE IN STRATEGY The rapidity and extent of the drop in my portfolio has caused me to rethink my basic investment strategy. As many may know I have been a buy and hold player for some time being driven by tax minimization considerations. I think I will change to a defensive strategy especially for IMRS.Every time IMRS passes a strike price on the next leg up i.e. 35,40 I plan to buy 2 month out in the money puts in an amount equal in $ to 10% of what I would realize if I sold 1/3 of my portfolio with a trailing stop 10% below the highest recent price. I wil be using trailing stops whichwill be set based upon where IMRS is within the trading channel.I am going to sacrifice upside potential for downside protection. If I am convinced IMRS is not in a sideways trading period I may buy 2 month straddles. IF IMRS continues to make perioidic 40% retrenchments of any substantial gains I could be facing a quarter of a million $ drop with just my current IMRS holdings. While emotionally I was very calm in the current drop it was because I had just listened to the conference call. IMRS is not noted for commenting ina dvamce on earnings expectations. I don't need at my age a lot of heartburn or worry.I definitely plan to keep most of my money in IMRS so I have a large diversification risk.In addition when I updated my proability distributions today for different options I came to realize that for August options I needed to consider the probability of a major market correction that would overwhelm whatever good forces might be driving IMRS prices up.I guessed that there is a 1/3 chance this could keep any out of the money IMRS options just that through August 21 before I was smart enough to sell the option.Part of the reason for this strategy is the fact that I am fully margined. Fortunately in this recent correction I was able to liquidate a large fraction of my holdings other than IMRS without undue pain.Today though I sold 60,000$ of SYNT at 28, 2/3 of which was bought @ 13, but 1/3 was bought @ 33. The current market sell-off, which I now believe may continue for a week or so more, made me realize it is very easy to see the trees but not the forest when it comes to Y2K investing. I hope and expect to regain what Ihave lost in the past week.I got burned badly twice in 1997 with unexpected adversity.I don't want to have it happen twice in 1998. I have taken 60,000$ in actual profits from Y2k off the table. This served me well. My safe investment with the proceeds did protect this principal but no better than that. I only realize now I have been obsessed with really beating the pants off the best mutual funds in the country. That is an ego trip that will not serve me well long term. I have made a 50% downpayment on my new House and have money set aside for all the furniture I need and even my first 2 quarterly estimated income tax payments.I will owe an enormous tax bill for both 1998 and 1999 if all goes well.It is time for me to become more risk adverse.We can only all compare investment performance at the end of 2001. Hopefully none of will look back and wilfully say: IF I ONLY HAD" ".

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