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Strategies & Market Trends : Value Investing

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To: Freedom Fighter who wrote (5805)	1/19/1999 9:07:00 PM
From: Bob Rudd	Read Replies (1) of 78497

Wayne: Highfliers selling calls. The whole point of the operation is to fully participate in the downside collapse of wildly overvalued issue like AMZN. When this will occur or the shape of the downtrend are pretty much unknowable as is the intervening price path. Selling calls exposes you to potential price explosion - AMZN moved about 100 points intraday in 5 sessions, without considering major expansion in risk premium 1 option would have exposed you to $10,000 drawdown, without giving you access to potential price IMPLOSION. It would seem, however, this might be a reasonable strategy for a moderately overvalued issue with moderate fluctuation that lacked catalyst to sink or soar..you would be paid to wait. I wouldn't do it, but it seems reasonable. A variation would be to use call selling to let the market take you out of an issue that you owned yet felt was fully priced..covered call writing.

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