<<we have seen this 540 to 731 move we can see a retest of 725 but I would
like some work on this resistance a retracement to 650 will be good and rather 620
would be a good point to enter.>>
IQBAL LATIF on Apr 28 1999 5:23AM EST
<<I think we have seen this 540 to 731 move we can see a retest of 725 but I would
like some work on this resistance a retracement to 650 will be good and rather 620
would be a good point to enter. People like me off loaded and so did others,I wrote
yesterday that hedge funds would hit the 725 hard and we saw that selling in
leaders, but don't get trapped in this vicious cycle, wait for decisive break above
725. It would take some time to take out this 725 so for me I will wait for a double
close above 725 to think of reestablishing some positions although I will at 195 on
EBAY or test of 675 establish some very selective positions. Like AOL at 145$.....and AMZN or Yhoo at 10% lower.>>
I think we will see a rebound from 640 area, I have late last night re-established positions in AMZN AOL EBAY for May, expecting good AMZN earnings and a recovery to 700 from this 640 area test, I may have been early but it is worth to put money on my support, as a hedge I sold calls DOT 820 for 95/8, the premiums of EBAY 210 AOL 145 and AMZN were too steep, I thought let me have this cake and eat it too, I sold well outside the monies to pay for my purchasing last night, if this thing breaks 640 I will get out of DOT 820's at 625 area and add some more if it takes off from 650 I am sure that although premiums in 820 will go against me but the calls premiums of EBAY AOL AMZN will increase at much fater rate,DOT contract is worth 60,000 $ so if I have to lay out 50,000$ for May calls I need to sell atleast 50 contracts to purchase 10 contract each of EBAY and AMZN and AOL, (now 50 contract on DOT is like shorting DOT worth 3,000,000 $, to purchase calls worth 600,000$ and short DOT worth 3,000,000 looks uneven but I think the protection this trade offers outstrips the risk.I am long 3% to 4% outside the money calls on individual stocks and 820 is 160 point away from where market closed last night that is nearly 24%, I am long on leaders in valuation term nearly '1/4th of total short' very near to the market however short at a distant, hopefully this will be a good trade.
For me 1/3rd rule demanded that I should enter on the other hand I wanted to hedge my exposure if DOT or AMZN would go wrong at 650 and slides to 625. I think we may not see 820 by May so for me the best approach would be to enter here partially, and ride the second test to 725 if it has to come.I will certainly on break of 725 add adequate long calls but 725 would mean EBAY at 230 AMZN at 220 or AOL at 174 area, and the time premium by next week will start eroding on my naked DOT 820 calls. This is a risky trade but good to enter if the area of reentry is on a interim support. Other contributing factor was my outside the money 'dog'calls for May which so far lay wasted like Yhaoo 210's 220's and EGRP INKT 150's I thought that these calls will also give me the neccessary hegde if things go real hectic on upside. Frankly like BKX this is a trade on OPM, but the real risk is huge move where DOT traps me and by May 7th we are testing old highs of DOT, that I think I am exposed and I am prepared to take a risk. Bottom line the trade is to re-enter the nets with some hedge and ride this second test to 725, on other hand I would go long agan at 625 but take out the naked calls of 820, I would like to think that Ebay AoL AMZN even ATHM may do little better than others, we may see some weakness in DOT but the premiums in these stocks may hold.. Ideally a weakness and further entry at lows is the game plan, but i have planned for the upside move, it is always good to plan for worst, never expect market to do what you want it will give you but it is always good to rationalise one's approach.
The trade is on let see how do we get out of it.. |
