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Technology Stocks : Network Associates (NET)

NET 197.10

-1.2%

3:59 PM EST

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To: jas cooper who wrote (3955)	1/7/1999 4:22:00 PM
From: Just_Observing	Read Replies (1) of 6021

Here is my strategy for any stock holding Since no one would respond to your query, here is what I would do. The strategy is purely mathematical and has no dependence on the stock. It is just risk-management. And it involves keeping sufficient degrees of freedom open so that you can take advantage of price movements - both up or down. CASE A - you cannot trade options Assume you have 1000 shares. Sell 500 now. a. Stock goes up sharply Sell another 300 b. Stock goes up marginally Sell another 100 c. Stock does nothing do nothing d. Stock drops marginally Buy back 100 shares e. Stock drops sharply Buy back 300 shares Use these ratios consistently at every point until about a 100 shares remain. Sell these at any time. It is generally a reasonable strategy CASE B Can Trade Options Assume you have 1000 shares. Sell in the money calls for around 700. Would sell 7 calls Feb or longer. Must get at 5% to 15% time-value premium at least. Should have at least 15 to 20% in the money premium. Total premium should be at least 25%, preferably 35%. a. Stock rises sharply Sell calls on the remaining but let these be out of the money. If the stock rallies from $55 to $60 sell the $65 calls on the remaining 300 shares for at least 5 to 10% time-value premium b. Stock rises slowly, stock stays the same, stock drops slowly Do Nothing. Options trading can be expensive. You are making money from time-value attrition. c. Stock falls sharply Cover the options that you sold if they hit one third of their original price (you have collected 0.67 *25% to 30% = 17% to 20% of the stock price of 700 shares or 12 to 14% of your entire stock holding). Sell the same 7 options at lower strike prices with about 25% option value (both time and intrinsic). Repeat this procedure until all stock has been called away. Note that this strategy will take somewhat longer to execute. But the return can be significantly higher. You can simulate these strategies on a computer using a random number generator to feel comfortable with them. These strategies have worked for me when I've had the discipline to follow them. I hope this helps. Good Luck

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