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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures
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To: Tom Trader who wrote (6552)10/16/1998 12:21:00 AM
From: Brian Hornby  Read Replies (1) of 44573
 
Tom,

Writing options. My feeling is that tomorrow (morning?) is perhaps a good time to establish shorts on November call options. Although there is likely more upside next month the decrease in premium into next week would work against that, and any pull-back (likely IMO) would drop the premium faster. Your thoughts?

Some background. I tend to do deep OTM shorts on SP puts and calls, which is perhaps somewhat different than your strategy, which I believe is shorting closer to the money OEX options? In any case, for November I have some shorts on put options established (received 2.20/contract for SP 700 and 2.50 for SP 725) and am thinking to complete the straddle with call options tomorrow, again deep OTM, say 1180+. Or possibly I will sell spreads on the call options. On the puts I plan to buy a smaller position at 750 to hedge the position early next week and then perhaps add more puts at 800+.

I like the way you leg into positions and hedge them when the opportunity arises, that is good money management; the importance of which I have learned the hard way. For example I expect there were a number of people expecting their SP 1040 (or 1050 etc) shorted call options to expire worthless tomorrow when the lightning struck only to find themselves with heavy losses or possibly bankruptcy. Some people purposely short large quantities of such options close to expiration -normally they win, but today.. I expect the people shorting the OEX options Bev suddenly found worth substantial money (congratulations!)were very sorry.

Brian
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