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.

Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Night Writer who wrote (11307)	7/30/1999 1:24:00 AM
From: Hectorite	Read Replies (2) \| Respond to of 14162

Here's a theory on those JAN 40/45. Looks like bull spread to me. Sell the 45, buy the 40s. Take a 5pt credit. If the stock stays in the doghouse, you break even (actually better because you had the 50K in a money market for 6 months. Max profit with stock > 45, incremental over 40. Is it rational to be that bullish? Well it was 50 last january, so its certainly possible. I'm thinking, hell, why not? If you have a mind to park cash why not do it in a manner that has a least a possibility of paying off handsomely. I've never heard of this strategy before, probably because its not easy to get the full 5 pt credit on the spread as this guy did (well, actually 4 15/16 in this case).

To: Night Writer who wrote (11307)	7/30/1999 4:25:00 PM
From: Herm	Read Replies (1) \| Respond to of 14162

Welll NW, We are getting some nice dialog on this strategy. I have never done one and I'm learning along with the rest of you folks. I am looking into the books to see what I can find out.

To: Night Writer who wrote (11307)	8/1/1999 7:22:00 PM
From: NateC	Read Replies (1) \| Respond to of 14162

What I don't understand is the logic behind today's large option plays on CPQ. Given the rather grim outlook for Compaq's short term future you can appreciate my curiosity about people buying and selling 1,000 and 2,000 option positions today. I realize all we can do is speculate on the positions. But it should make for some interesting and perhaps educational conversation Dave Wright sent me a neat book, in which a very experienced fulltime options investor ( a big time one)....was comparing options investing to a poker game. He was VERY wary of buying and selling like this.....because one party.....maybe the put buyer.....maybe the put seller.....MUST INEVITABLY HAVE more information than the other one. (Someone in the poker game has a better hand) If the put buyer knows something (inside maybe) negative about the company...he is going to burn the put seller.....who thinks he is making a great return because the puts he sold he THINKS are going to expire worthless. This put seller could be a uninformed MM, who might have to buy the shares at a much lower price than the sales price for which he has to sell them to the put buyer. Point is.....someone here.....has superior information....or thinks he does....and the other has inferior information.