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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: MrGreenJeans who wrote (4024)	3/21/1999 11:49:00 AM
From: Trebor	Read Replies (1) of 15132

>I also believe every investor must fully understand option theory to be sophisticated.< I wouldn't disagree but would still maintain there are certain reasonably low-risk option strategies that an average investor can use profitably. Not every time but sometimes. These would include protective puts, covered calls and calendar or ratio spreads. Homework is required certainly, but not a PhD in option theory. And if you can find a stock that you really think is going places, and if you have a few bucks you can afford to lose if you're wrong, then buying calls can pay off handsomely. Case in point: on Friday I exercised two March $60 call options on Real Network (RNWK) -- the stock is currently around $140. So for $12K plus what I paid for the options ($2,100) I own $28K in stock. All in a matter of weeks. I could have sold the options for a nice profit but I think the stock will still go higher. Of course this is an extreme example. Had RNWK stayed around $60 I would have lost my $2,100. (And let's not talk about my Dell options.) The secret, I think, is to walk before you run and don't bite off more than you can chew.

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