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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: SJS who wrote (32556)	9/22/1999 3:21:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

OT to SJS, on options and moose: The government is paying attention to this, and is making some efforts to reduce spreads and actually have some competition between option markets. I expect that spreads and commissions on options will gradually go through the same transformation that stock trading has gone through. I haven't been doing this long enough to remember 500$ commissions on a stock trade (and only if your broker approved of your trade!) but I've read about the bad old days. 10% spreads on options, common now, will slowly vanish over the next few years. I expect they will stabilize at about 2%. We'll need to go to a decimal quotation system to do that. I suspect one of the main reasons for the resistance to a decimal system is because it puts a floor under spreads, and to make price-fixing easier. But the cracks in the oligopoly are already appearing. In the meantime, it's important to understand the (unfair) rules of the game, to improve the odds of winning. I calculate the spread, as a percentage of the bid, before I place any option order. I never accept more than 4%. If they won't give it to me, I don't buy. I buy a lot of longest-term-out-of-the-money-calls, but only when I think the stock will at least double over the life of the call. That forces me to be very selective. I need a significant expansion in both PE and earnings for that to happen. This narrows the choices down to out-of-favor growth stocks, mainly tech. I neverneverNEVER place a market order. Actually, that's not true. Last December 30 (my birthday, as it happens), I placed a market order for a truckload of Novellus puts. I needed to sell before the end of the year, because I had large short-term cap gains (on other trades, of course), and I needed the tax loss for 1998. I got 1/16 for them. I managed to not think about it while opening my birthday presents. Waiting, I think, is my most lucrative activity. I've just bought some property, so now I have some useful distractions to keep me from trading too much. There's a cherry tree I need to move. I planted it in the front yard, but a momma moose and her baby come by every week or so and graze on it. I can tell, because they leave footprints 4 inches deep. They leave the lilacs and maples alone, but seem to consider fruit trees a delicacy. I need to move it to the back yard, which is enclosed with a 7-foot fence. Gotta go.