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Strategies & Market Trends : Tech Stock Options

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To: Allan Harris who wrote (41873)	4/29/1998 8:33:00 PM
From: Tom Trader	Read Replies (2) of 58727

Allan -- you ask some excellent questions and raise some valid questions/issues. Regarding my entry points for PFE in relation to the methodology for trading the S&P futures, I am not sure how long you have been following my posts but the difference lies in my philosophy of trading as opposed to investing. When trading whether the futures, stocks or options -- I will almost without exception---only trade with the trend and I will almost never average down. Most of my trades last from days to weeks. When investing -- I will take positions against the trend because at that point the decision is based on fundamentals and not technicals, for the most part--and will average down. Also, my time horizon when it comes to investing is in years. I own stocks that I have held for years -- and will not sell them unless the story changes. It is rare for me to sell one of these positions. I want to buy a position in a quality company cheap -- when it is under-valued and when I do so it is generally in a sector that is out of favor. For example, right now I am looking at taking positions in the tobacco sector and MO specifically -- needless to say, any one who hears that I am looking at this sector thinks that I am out of my mind. But I heard the same disbelief when I bought into SLB in the mid-80s. I am absolutely convinced that buying quality stocks in sectors that are out of favor, when it comes to investing is the way to go--because that is when they get under-valued. PFE, is an interesting one -- a quality company with a unique product --and I don't know that I have any rules for this one. I would not challenge the wisdom of anyone taking an initial position at its current level--even as an investment. As far as the price running away in the meantime -- that is a definite risk. It happened to me on LU where I had a target of 70 pre-split-- for an initial position--and it got to 72 and then took-off. Today it is in the 70s after a 2:1 split. I am not a good person to ask when it comes to investment positions because my time horizons are long and my views about valuation are not in vogue when one is facing a raging bull market where people defend valuations of 4x sales for a company that makes a commodity and ludicrous multiples of earnings (that is where there are earnings) for companies in the internet arena. I prefer to bide my time and wait until the opportunity presents itself--which invariably happens sooner or later. After all the worst that can happen is that I will remain in cash -- earning 5% in T Bills. I hope that this explains the apparent contradiction that you cited

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