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Technology Stocks : Broadcom (BRCM) -- Ignore unavailable to you. Want to Upgrade?

To: pheolix who wrote (1947)	6/19/1999 9:33:00 PM
From: Keith A Walker	Read Replies (2) \| Respond to of 6531

The nice aspect of selling the puts is that there is usually a pretty good premium to work with, likewise the calls have a hefty premium so your better bet is actually selling naked puts, say an Aug 110, as long as you don't mind owning the stock. Of course, if you want to play out a little dicier scenario, sell a naked call, let's say an Aug 125, to add to the put. You are setting up a range in which you believe the stock will settle and you can capitalize on your thinking. If you get worried, you can buy an Aug 130 call and feel safer by having hedged your naked call position. Maximum downside would be $500, but you probably made up for it by selling the put. This is all a bullish scenario anyway, so if BRCM tanks (which I doubt), you've got to start thinking through the converse of the above example. For what its worth, I think I'll look at the actual prices for these contracts next week and see if this idea can make some money. Again, all of this is predicated on the hefty premiums with BRCM options. Some issues wouldn't work out as nicely this way.

To: pheolix who wrote (1947)	6/21/1999 7:37:00 PM
From: Farfel	Respond to of 6531

I think your options strategy is much too complicated. Number One: O'Neill said to keep it simple when trading options----don't get into all the "straddles", speads (both Bear and Bull) and the like. Rather, just buy your calls or puts with at least 6 months until expiration. Second: he said that he considered selling calls to be a really poor strategy because you essentially trade away all the upside potential of a stock for a small amount of premium. Consider how much the 60 Call goes for now on Broadcom----the August was a 5 bagger return on front money--------yet, if you had sold that call you would have only reaped 20% of that ----and there is still another 8 weeks left on the option------sounds like a "cheap" trade off to me. William O'Neill considers it a cheap sellout of your stock position. If you want straight interest----then selling calls does return more than a CD----unless you are holding 3 Com as my friend was ----3000 shares he ate when the stock plunged as he sold his cheap calls---did he win or lose----he lost "big time"----those people are not paying you the premium for nothing----they are paying you the premium so that if disaster occurs, you, not they, are "holding the bag" and that "bag" will stink.