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.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: radames who wrote (83880)	11/10/1999 2:37:00 PM
From: KeepItSimple	Read Replies (1) \| Respond to of 164684

>as that is where the mm's will make money,, Are you implying that an underlying stock is often manipulated by the deep pocketed MMs who make more money through the evaporation of options premiums than they do through buying and selling shares? :) I mean, comon. It's just a coincidence that "max-pain" is where the stock falls on expiration day nearly every time. :) Stocks rise and fall based on the fundamentals of the company, not on blatant manipulation by the derivatives crowd, right? That's what they tought me in business school.. Then again, they also taught me that the path to riches is to run a profitable company, not through dumping stock to the public as quickly as possible during a mania! Did you know there would be about 20 millionaires in the valley if there were no such thing as the stock market? Nobody besides cisco/msft/intel has made enough profit to make ANYONE rich.

To: radames who wrote (83880)	11/12/1999 3:30:00 AM
From: GTC Trader	Read Replies (1) \| Respond to of 164684

OT -- << it looks that short term yhoo is going to 170 or below by next friday,as that is where the mm's will make money >> Radames, I am still paper-trading to learn the ropes, but your comment caught my attention. If you can calculate where the stock must be for the MMs to make their money, then buying options accordingly would seem to be a winning strategy. Using the above example, assuming YHOO closes at 170 or 185 next Friday, as of close today, you could have bought the following puts: PUT / Strike Buy Sell(170) Gain(170) Sell(185) Gain(185) Nov 185 3 15 400 % 0 [100 %] Nov 190 4 3/4 20 320 % 5 5 % Nov 195 7 1/4 25 250 % 10 38 % Dec 185 9 1/2 15 58 % 0 [100 %] Dec 190 11 1/2 20 74 % 5 [ 55 %] Dec 195 14 1/8 25 77 % 10 [ 30 %] Dec 200 17 30 76 % 15 [ 12 %] If you are correct, obviously buying the Nov185 offers the highest return. However, if you are wrong, you can easily lose it all. The Nov195 looks like a more prudent approach, still offering a huge quick profit if you are correct and YHOO drops from 193 (today) to 170 in a week. If it only drops to 185, you still make a healthy 38 % in a week's time. Breakeven of course would be a close of 187.75. I am of course ignoring commissions which are fairly high. The December Puts still offer a 50+ % return if YHOO drops to 170 in a week, but they give you an extra four weeks for something to happen plus some time value if you sell earlier. To me, the Dec 200s offer the best risk/reward ratio. Of course, you could short the stock and make 12% if it drops 23 points, or 4% if it drops 8 points. You have no time limit for it to go down, but you would need a stop-loss in case YHOO jumped and you risk a whipsaw. In Conclusion, I am buying Dec 200s on paper, with a GTC sell at 15, and a plan to consider liquidating next Friday, depending on the stock action. Radames and others -- Any comments on this strategy? Suggestions? Variations? What is the best way to calculate where the MMs make the most money? Has anyone tried this method over time? Successes? Failures? Forgive my naive questions, but I thought I'd ask. TIA -- HB On Topic: For the past four days, AMZN has been struggling with resistance at 75. If it cannot penetrate that soon, then I would expect a quick trip to 65. On paper, I would have bought Puts at open the last two days, but I don't know if I would have sold them or not. Assuming I did, I would be ready to buy more puts on Friday if AMZN hits 75 and doesn't bust through. If it does break through, I would look to sell them when AMZN is between 80 and 85. Thoughts ?