John,
Thanks John, I liked the y2kbook link.
I'm the type of investor that prefers to wear both suspenders and a belt. So, rather than positioning only for an expected downside come 2000/01/01, I would play both sides, at least a little, just in case. If ever there was a situation appropriate for holding a long option straddle or strangle, Y2k-day is it. Long, out of the money calls and puts on the same underlying, purchased early 10/99, with a 9-month minimum horizon should do nicely. There's a very good chance that both sides of such a position could perform well, via the initial move and a potential snap-back.
Still, holding mostly cash or cash equivalents is perhaps most sensible. An option spread strategy should expose only a relatively small portion of trading assets, maybe 10-15%.
However, note that there is a lot of market risk with any non-cash "downside" leveraged instrument held over the Y2k period in that the markets may not be open on the days when that instrument would theoretically be most favorably priced. Or, if the market is open, one's broker may not be, or one may not be able to reach one's broker. Pre-set sell orders may be considered prudent on at least part of the position. |
