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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (3985)	7/18/1999 5:55:00 PM
From: Len	Respond to of 54805

Options: For those of us relatively new to Options there is an excellent educational section on the web site for the Chicago Board Options Exchange: cboe.com Regards. Len

To: Wyätt Gwyön who wrote (3985)	7/19/1999 12:22:00 AM
From: Will Hou	Read Replies (6) \| Respond to of 54805

[LEAPs etc] G.Moore and thread, I am very glad to find this great thread (thanks Uncle Frank for starting it! as well as many great postings like yours). I wish I had known the concept of Gorilla Game sooner! Your comments on LEAPS are really valuable, but there are some minor details that might help others, if you don't mind me adding: 1) When talking about LEAPS, we should keep in mind there are calls and puts, although most of us usually think of them in terms of Calls, as you suggested in your postings. 2) The LEAPS do not change 1 to 1 with the underlying stock, after it's in the money. For example, when QCOM go up 5 points, QCOM Jan 2001 130C will NOT go up 5 points the same day (hence no time erosion involved). The change might be 4 points. This rate of change is termed "delta": A measure of the rate of change in an option's theoretical value for a one-unit change in the price of the underlying stock (of course it makes sense, if you a math-lover :) 3) There's a very nice toolbox offered for free by the Option Council, which in my view, is a ABSOLUTE must-have for anybody what wants to learn/use options, beginners or experts. It can be downloaded from CBOE website (www.cboe.com). It has very complete sections on definitions (that's where I copied the definition of delta from), along with a strategy testing section. It allows you construct every conceivable scenario and test them out. Therefore, it's a very very good learning tool as well. Option Council also offers free seminars around the country. The information can be found on their website as well. I went to their seminars before, well-organized with experienced lecturer. 4) Although LEAPS is not as risky as regular short term options, they still have more risks than underlying stocks (ok no free lunch). I do use LEAPS alot but by no means an expert. I would like to offer a reminder here: the sellers of options are mostly more experienced than the buyers. Just think about it. Think about why they are selling. Once you understand their reason and the strategies behind it, it's a nice/fun tool to use. Finally, thanks for posting that article from Barrons. There's an interesting strategy used by many traders discussed briefly (not in detail) in that article and actually it's a very safe strategy (buy in-money LEAPS calls, sell out-of-money short term calls. How can this work? for those who don't know, go figure it out and you're going to find it very interesting indeed! LOL) But there's a problem here. You have to trade a lot, with low commissions, pick right candidates (still!) and don't care about taxes. About QCOM as a gorilla: I am not very familiar with QCOM (followed it once a while back, know about its leadership/patents on CDMA a little bit) and got a question here. Is it a gorilla because it's dominant role in CDMA market or CDMA will be dominant in cellular industry? It seems to me that GSM has bigger market share (less efficient technically I believe) and most importantly, they've got wireless cellular link enabled (with PDAs etc) already. My SprintPCS rep told me that they are still working on this issue. What would happen if WCOM decides to get into GSM market in US (buy to build)? Sorry if I asked the question on the wrong thread but I thought it's related to its gorilla status. Also, any thoughts on the upcoming collision between LU and CSCO? What would be a good strategy here? Thanks for your attention and all the best, Will