Michael, thanks for posting some of the particulars of that article. I knew that IBM sells off rather badly - especially in bad markets. I believe that I told Jules G that it has a history of selling off about 40 percent. That was just one of the reasons that I came up with this trade. The IBM Leap puts only lose about 2 dollars every 10 points up by the IBM stock - until you get into the highest priced puts, and then the puts will gain a little more. Intel has now went up about 10 points, while most of the IBM leap puts have only went up 2 points. Jules and I expected Intel to outperform IBM. But, even if IBM should outperform (which I and probably everybody else on this BB doesn't expect it to do) Intel while both of them go up - it will still serve its purpose of protection. On the downside
the IBM puts will not protect Intel stock dollar for dollar until it reaches a certain point. But, again, we expect Intel to outperform
IBM and as such Intel would not be falling as many points as IBM in a down market. Finally, the purpose of these Leap puts was not only to protect the majority of Jules' Intel holdings, but they would allow Jules to remain comfortable knowing that those holdings would be protected at all times. Again, these Leap puts can be rolled up into a higher strike price for a few dollars every 10 points up should IBM continue upward from here on.
Or, they can be allowed to just sit there and expire in Jan 98 after having exchanged a few dollars per put in exchange for a 40 or 50 point move up in Intel (ggg). In other words, the puts are expendable if they should not be needed because the markets have all continued up throughout this year. I'll exchange 5 to 7 points to cover each share of Intel in return for 40 or 50 points up at any time - and the peace of mind knowing that I can't be wiped out on a moments notice because something happens worldwide that spooks the markets (ala 1987). I hope this explains things a little
more. I will not say what strike price that Jules went for in the IBM puts - that's his business and he is the only one that can release that information, if he so chooses. I do not divulge other people's business when they communicate with me.
Anthony M. Not lucky, just good (ggg).
And speaking of good, it's time for Good trading. Jack |
