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Strategies & Market Trends : Waiting for the big Kahuna
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To: Haim R. Branisteanu who wrote (17986)5/7/1998 10:16:00 AM
From: Chip McVickar  Read Replies (2) of 94695
 
Haim
Thank you very much for your reply...it is very helpful and will take
some time to digest.

I understand selling covered calls and straight puts, but how to combine
these for profits would depend on understanding the rate of return,
timing the decision and entering at the right strike price. You suggested
1 month out...would 3 months be more conservative would you gain anything..?

Example: I purchased a 100 shares of GE at $22 (after 3 splits) and it
is currently at $83. Now in the month of May I would sell a June 80 call
and receive a premium of 5.25($525)....take this and buy a put on the
June 80 strike for 1.625 (todays prices). If GE falls in value get out
of the call or roll forward and keep the put.

Would I be better to buy a put at $83 for 3.75..?
Would it be better (conservative) to go further out say 3 months or
even into Sept 83 strike 85 which has a call premium of 4.625 and a
put of 5..? If I went out to Sept on calls would you take a put out
earlier or keep them paired..?

Have I got it right..?
Chip

Selling is always difficult....these stocks are for long-term growth
and fortunately they have grown. I have sold....in the past that
occurred when the story changed. Those close to the company would be
selling, but not the general market....gave one time to get out.
Today....it is like lightening.
If GE comes out with a bad news or Walsh drops dead...todays markets
allow for no elbow room and the decline is substantial. If I am not going
to sell....I must extend more capital towards proper hedging.
Thank You for the suggestions....they are very helpful.
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