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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: TShirtPrinter who wrote (41762)	9/18/1999 9:12:00 AM
From: Ibexx	Read Replies (1) \| Respond to of 152472

Re. Why short puts and not long calls Two primary reasons among others: 1. Selling puts is more advantageous in a trading range market prvoded that the strike price is set appropriately. 2. Selling puts frequently is a better strategy than buying calls in a volatile stock (very rich premium). 3. However, shorting the puts is not recommended for investors with restricted resources; brokerages do not routinely allow such trading strategies (Level 3 risk). Ibexx

To: TShirtPrinter who wrote (41762)	9/18/1999 11:37:00 AM
From: PAL	Read Replies (1) \| Respond to of 152472

Tony: Both selling puts and buying calls are bullish strategies. The risk of selling puts is much much greater than buying calls since you may have to pay the entire strike price if assigned. Therefore, brokers have stringent rules for selling naked puts. The funny thing is that selling puts has a finite risk while shorting a stock has an unlimited risk, yet a broker will let you sell short before allowing you to sell naked puts. In selling puts you have to pick a really dynamic company like QCOM. Let us take an example from Jan/190 options (at the money): Call Jan190 AAOAR : 27 Put Jan190 AAOMR : 25 If you buy call: right away you are behind $ 27/sh. Thus the stock has to go to $ 217 before you break even. You will lose $ 27 if the stock stays at $ 190 upon expiration. If you sell call, you collect $ 25, and the stock can drop to $ 165 before you starts to worry. You will lose $ 27 only if the stock drops to 138, but by then you can do a repair: buying back the option and roll into a later month for the same or greater premium. On paper you lost in the first transaction (tax writeoff) but positive on cashflow Upside potential? Yes there is a limit. Let us just say QCOM goes to 300 come Jan/00. You triple your 27 investment getting $ 83 profit on buying calls, but only $ 25 in selling naked puts on zero investment (aside from margin requirement, so if a person is a purist, the opprtunity cost should be included). If one wants to sell naked options, make sure that one really studies and make paper trades before plunging good earned money. While it can be profitable, the risk is significant. Good Luck Paul

To: TShirtPrinter who wrote (41762)	9/19/1999 6:48:00 AM
From: EepOpp	Respond to of 152472

just to add in my 2 cents... assuming the options you use are OTM, when you buy a call, the stock has to move to a certain level and at a decent rate in order for you to make money. If it goes up slowly and does not go past the level (strike price plus premium) you need by expiration, you will lose money. However, when you short a put, you will lose money *only* if it goes down past a certain level. Again, if it goes down slowly, it may not reach your level (strike price minus premium) by expiration but this time you will make money rather than lose it. So you keep the premium if the stock stays flat or goes up. If you look at it in terms of the odds of whether a given price move will be Up, Flat or Down, there is a 1 in 3 chance of making money on being long a call as opposed to a 2 in 3 chance of making money on being short a put. So your choices are: (1) more likely to have a winning trade, but amount of money made is limited (short the put); or (2) more likely to have a losing trade, but amount of money made is unlimited (long the call). at this point, your question will be: "How well do i know this stock or underlying?" EepOpp ps. hope this makes sense. I'm still trying to figure this stuff out myself.