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Strategies & Market Trends : Tech Stock Options
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To: Margaret Mateer who wrote (57831)11/19/1998 9:58:00 PM
From: ftth  Read Replies (2) of 58727
 
Question for anyone: Regarding AMZN:
If a person is a medium term (couple months) trader, why buy long stock here? When a stock moves as far and as fast as AMZN, Deep, Deep In the money calls trade barely above intrinsic value. This provides a unique situation because of the magnitude of the move. Jan 75 calls can be had for a fraction of a point above intrinsic value.You can essentially have 2:1 leverage (compared to long stock)for about a point. That's less than the margin interest you'd pay to have a similar situation with the stock alone for 2 months. The delta on the Jan 75's is very close to 1 so it trades point for point with the stock.

Note: same situation doesn't exist for put buyers because the stock is recently off its highs.

Am I missing something, options gurus? (other than if everyone did this it would probably end up bringing the stock down because the buying of long shares would dry up, which would probably cause the mo-mo's to bail since mo has gone away)

dh
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