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

To: Jon Koplik who wrote (50855)	11/18/1999 10:19:00 AM
From: PAL	Read Replies (1) \| Respond to of 152472

Jon: I have been selling naked puts regularly on dynamic companies like AOL, CMGI, DELL, and of course QCOM. When the company becomes stagnant (e.g. DELL), I closed the position and use the margin power to sell naked puts of other stocks. Selling puts is like that turtle, steady but keeps moving. There is nothing wrong in buying calls which can give a fantastic return, however in a correction, you lose your money in buying calls, just like QCOM right now. a. Buy Jan340 call : $ 47/sh (AAFAH) - cash outflow $ 47/sh b. Sell Jan340 put : $ 47/sh (AAFMH) - inflow inflow $ 47/sh (tiny bonus: earns dividend in money market) QCOM has to reach $ 387 to break even in buying call, but only to stay above $ 293 to b/e in selling naked puts. If QCOM is below $ 293, you do a "repair" strategy on your naked puts. There is no repair mechanism that I know of in buying call should QCOM closes below $ 387. All in all, naked puts give you more flexibility to face a market downturn/correction. Of course buying call can give an unlimited upside potential in a rising environment. Even with the ups and downs of QCOM, I can smile either way: when QCOM goes up, the naked puts decay fast, time to close. When QCOM goes south: time to sell more puts!!! Paul

To: Jon Koplik who wrote (50855)	11/18/1999 11:59:00 AM
From: RoseCampion	Respond to of 152472

The answer every time so far has been YES ! (And, I wish I could dare to do larger quantities, too). Jon, one possibility (that may or may not be better, depending on Q's price, your broker's margin requirements, and your time horizon) is to enter the put sale as a bull (vertical credit) spread instead. (For example, sell the Q Jan01 300 puts, buy the Jan01 250 puts.) The difference between their two prices right now is $20, which you pocket. The margin requirements are (very roughly, in this example only) half of what a naked put position would be, so you're able to collateralize a larger position than you would with a straight put sale. You've also limited your potential downside risk (not a big concern with Q, I agree). Again, this may or may not work out better for you. Other possibly even better strategy is to enter the naked put sale alone, watch Q go up, and then make it into a spread to 'kill' the margin requirement. (Example: sell some Jan00 300 puts naked; three weeks later Q has happily gone up 50 points, you now buy the Jan00 290 puts for say, half of what you sold the 300 puts for - your margin requirement is only the difference between the strikes, or $1000/contract. You can then sit on the spread and watch both halves expire worthless, but have freed up almost all of your margin to repeat the exercise.) This has worked well for me this year, and as far as I can tell hedging the spread doesn't have any tax consequences as long as you close out both halves in the same tax year. cheers, -Rose-