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Strategies & Market Trends : Value Investing
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To: Freedom Fighter who wrote (6033)2/18/1999 5:36:00 PM
From: Allen Furlan  Read Replies (1) of 78530
 
Wayne, a couple of ideas for those very nervous about the market.
1)Sell in the money puts on stocks you believe to be solid. Time frame should be 4-6 months to give position time to work out. Example in Sept-Nov time frame I sold Feb puts on cmo(5),bcu(5),zeus(7 1/2),and ldry(7 1/2). This is equivilent to buying stock at discount from market price. Advantage, proceeds can be used to buy treasury notes, and margin is only 20% of stock price plus proceeds of sale. For example the bcu put was 2 3/8 with stock at 3 1/8 the margin was about 3 but you have 2 3/8 in your account. You can also sell out of money puts if you are less confidant of stock. Currently I am considering ist and idtc as out of money candidates.
2) Sell close to the money leap calls against stock. Example, madgf at 3 7/16 and 2001 5 call at a 1 3/16. Cost 2 1/4. Double in 2 years if stock reaches 4 1/2. Protection down to 2 1/4.
3) Sell ratio of way out of money calls. Example long 700 shares of plat and short 20 calls ,2001,strike 35. Stock at 13 1/4,calls at 2 3/8. Shares cost average of 6.70. Must buy additional shares if stock climbs but my expectation is a channel between 10-30 and more risk on downside than upside.
Also if your interested MAJ has news which I believe forbodes well for the stock(MY average price is 2.80)
biz.yahoo.com
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