Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: John Stewart who wrote (7996)	7/18/1999 10:36:00 AM
From: Ian@SI	Respond to of 10921

John, You've raised an interesting set of questions that I haven't thought through yet. Some initial musings: 1. Short term Timing: If there's some known external event approaching, a contrarian approach is probably called for. i.e. - With sentiment as positive as it is, I suspect that earnings might be a short term letdown unless there's some very positive forward looking statements in the conference calls. TA resistance levels minus a few ticks or so also is attractive. 2. Use of Options: I'm a rank amateur here; and haven't really thought much about this as an exit strategy. [although I did sell an in the money covered call on 1/3 of my SVGI position.] I've only used that strategy when my outlook for the underlying took a turn for the worse. I prefer to sell naked puts for companies I would like to own [more of], but don't mind just taking the premium if it rises above the strike. I really do like the idea of deferring the capital gain liability to the next tax year with the Deep in the money covered call Sale. The risk is that the sector sentiment changes and you're left with the stock, and the premium of course. Off the top of my head, that doesn't sound all that bad at all. Another thought that was starting to gel related to portfolio weightings. i.e. Perhaps we should have a portfolio weighting for this sector. Then, sell / buy as the weighting strays too far in either direction. Sort of a disciplined Sell High / Buy Low approach. I like the quantitative concept, but still think this must be tempered with the fundamental outlook for the sector. These companies have far too high a beta to always keep them at sector weight in any portfolio. If I sound confused about a selling strategy, I am. I want to make maximum profits even though, intellectually, I completely accept that is a sheer impossibility. Ian.

To: John Stewart who wrote (7996)	7/18/1999 8:12:00 PM
From: Thomas DeGagne	Read Replies (1) \| Respond to of 10921

Your idea of selling deep in the money covered calls as a exit strategy is a good one. In fact, I am planning to use covered calls for an exit strategy in PMCS (a semi company). I will definately look at using year 2000 calls as my cost base is $7.50 and the price is now $82.50 I would be careful with which contracts you sell. There is a danger with Jan calls that the contracts will be exercised before 2000. If this happens your tax benefits will be lost. Consider Mar/Apr calls or even 2001 LEAPS. If you do a personal study on this please post it hear. I may do the same for PMCS for strategy comparison purposes. Good luck