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Strategies & Market Trends : Stock Attack -- A Complete Analysis
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To: dennis michael patterson who wrote (15219)8/31/1998 11:53:00 AM
From: Robert Graham  Read Replies (2) of 42787
 
I have been seeing a trader this morning talk about *selling* PUTs. And this is an intelligent trader. Talk about being out of phase with the market. IMO this approach only works when a bottom has formed in the market. If the market continues down, they are SOL and they end up getting stock that is continuing to go down during a major market sell off. Yet another example of the bull market mentality that is still alive even in the more experienced traders. This is like inhaling when you are under water just because you are used to doing it on the surface. Like a scuba diver with tanks on my back, I stare in wide-eyed amazement.

I think your approach of purchasing PUTs is much more intelligent. However, remember what market we are in. We are not in a simple market correction during a strong bull market. You may not have the opportunity you are looking for which is more common in bull markets. IMO you need to develop a way of entering what is functionally a "short" type of position with respect to the underlying without having to wait for a bounce. This will take some time and practice. I would start out trading this on paper.

By the way, those that are still long in DELL right now need to find another hobby, or at least wait for the bull market to return so they can trade again in a market that they are much more familliar with. DJIA down 170 and NASDAQ down 72, which is yet another 4% down day for the NASDAQ. I wonder how well that PUT seller is doing today?

Bob Graham
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