Mike,
There has been a lot of talk lately about various option spreads and combinations. I almost have to dig out my favorite options book to refresh my memory of all the wonderful possibilities. I thought I would let all those folks whose heads are spinning when you talk about butterflies, bear spreads, bull spreads, etc. know about a book that talks about all of this and has helped me considerably to understand the possibilities. It helps you to think in whole new ways and devise money-making positions that you will be amazed at the lack of risk and possible high-returns. It really caught my eye on the shelf at the local book store with its title "Sure-Thing Options Trading" not to mention its cheap price. You have to love that title. Here is a link to it on amazon.com.
amazon.com
Ok Mike, onto bigger and better things. This next section is for you.
I have a mind cluttered with positive thoughts (too much Napoleon Hill) and I have a hard time seeing the downside in trades I select. So I thought maybe you could show me the flaw in the following plan.
I, like you, feel INTC is getting extremely overvalued and would like to take a position in it even before the Christmas lies. I think it is good for a ten point drop from here by January expiration. I love the fact that the CEO sold 1/3 of his holdings (I have not verified this %, I heard it from someone). We all remember how bad INTC tanked a few months after the last management dumping. He says it is just to pay Uncle Sam though. 700,000 shares or $61-62 million. So his income is over $120 million? I guess none of this really matters. The stock is overvalued.
Anyways here is my play:
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SELL(write) (1) INTC JAN 2000 100 call for about $19
BUY (1) INTC JAN 100 1999 call for about 2 3/8
BUY (6) INTC JAN 80 puts for about 2 5/8= $15 3/4 total
Per combo
Credit $1900
debit - 237.50
debit - 1575
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Totals $87.50 CREDIT left in your account minus commissions
Stock falls $10 by Jan exp. to $78
Buy back (1) INTC Jan 2000 100 call for $16
Sell (6) INTC Jan 80 puts for $6= $36
*Jan 100 call expires worthless
Credit= $3600
Debit= $1600
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$2000 Net per combo put on with 0 dollars invested.
What do you think Mike?
Also, my broker says he requires $25,000 in equity to do a combo like this. Does that sound right or do you know of any brokers with lower requirements?
Gambler
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