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

To: Wyätt Gwyön who wrote (5642)	8/31/1999 8:57:00 AM
From: edamo	Read Replies (1) \| Respond to of 54805

g.moore...."what could go wrong there" quite a bit, but it is dependent on the underlying. to me rmbs at the moment is a speculative play when it comes to option future, that is why it has the high assigned volatility. worst case, or max loss is if the stock gets delisted and you are assigned. unlike a naked call write or a short position, you are assigned the stock at the strike, your cost would be strike less all collected prem, max loss would be this figure.....no more, no less.......you must make one all important decision....how do you believe the stock will move in the time period. that is why i would look at ditm call buys, to reduce the upside move to get in the money...remember stock can move up, but time erodes prem, closer to expiry the less volatility of prem due to time factor. on a rmbs i would want to be in the money quickly and take profits. wouldn't recommend naked call writes.......too risky, naked puts i feel are conservative only if: 1)you have the capacity to accept the assignment(if assigned) 2)you have a desire to own the underlying, and would go long anyway. options are finite, that is why take profits when they meet your targets, unless of course you are buying the option with the thought in mind to exercise. example: 8/29/97 buy 10 intc 0080 calls @ 33 common @ 93 =21% prem to market intc splits, now own 20 0040 calls 8/27 intc @ 81 3/8 call @ 42 1/8 i intend to exercise at some point as i want to own intc. strategy sell 10 calls at 42 1/8 =42125, exercise 10 calls at 40=40000, net to cash +2125 add in original prem of 33000=30875=cost for 1000 shares of intc obtained thru leap contract buy. if i were to sell out right the option contract i would profit 84250-33000=51250 about the same as my profit in the newly obtained common. but my belief is the common will run further. rmbs too risky for me....i would look at intc, msft,dell,hwp,gtw,ibm,csco,lu,pfe,mo, major difference is all companies with sustained earnings growth, some higher then others, but all capable of doubling in a three year time frame. read roth...it's an easy read...take care ed a. p.s...did the same with intc 9975....exercised at expiration...good way to build a quality portfolio, especially if the stock splits...