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Non-Tech : Tyco International Limited (TYC) -- Ignore unavailable to you. Want to Upgrade?

To: fellowfool who wrote (685)	11/15/1999 2:05:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 3770

FF, I sold Jan 47 1/2 puts for several reasons. First, I did not want to pay additional taxes this year so I looked for a close-in 2000 put. Second, I am very bullish on this company, so I was looking for significant appreciation of the underlying security and some time value. Unfortunately, the lack of volatility of the stock (only around 30% as I recall) limited the time value (only $1 at the time I wrote the put). My suspicion is that TYC will see a strong January effect as fears of accounting practices abate. All of this pointed to writing a deep in the money put, and the 47 1/2s seemed to fit the bill, because if the shares were put to me my effective price would be $38. If you subtract the interest earned from the cash price of the stock the effective cost to me would be $37.89, and I am quite comfortable with owning TYC at that price. I think your strategy is sound, but when bad news hits I like to take a somewhat more conservative position by allowing greater time for the rebound. I might also add that the "bad news" in this case was concerns over accounting practices which I believe the company effectively met. But I would be wary of using this approach for companies in which there are concerns over intermediate term earnings -- companies like IBM. I particularly like your approach when the stock of a company falls for no apparent reason. I did this with great results with CTXS (I wrote Nov $60s for $5 when the stock was at $63, having come down from its high of around $71). One point that many novices fail to appreciate is that writing naked puts has all of the characteristics of a covered call with one great advantage: you have cash coming in when you establish the position, whereas a covered call requires net cash out. Good luck with your puts! Hope this helps. TTFN, CTC