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.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Bill Jackson who wrote (83414)	12/17/1999 12:56:00 PM
From: Elmer	Read Replies (2) \| Respond to of 1573029

Re: "Elmer, Now we have 20 questions right. So the price or date is wrong." No Bill the [strike]price is correct and the date is correct. I said I WROTE puts. I sold them (out of thin air). I do not now have the right to sell, I now have the obligation to BUY AMD at $25 at any time before the third Friday of January next. Earlier this week I wrote Jan $22.5 puts as well. EP

To: Bill Jackson who wrote (83414)	12/17/1999 12:58:00 PM
From: L. Adam Latham	Read Replies (1) \| Respond to of 1573029

Bill: Re: Elmer, Now we have 20 questions right. So the price or date is wrong. I think Elmer is toying with you a little. Actually, I understand what you're going through - I didn't follow options too closely until a couple of years ago, and often didn't comprehend what others were saying. Elmer said he sold 50 AMD Jan 2000 $25 put contracts (symbol is AMDME). He didn't disclose his price, but looking at the quotes, I assume he received about $1 3/4 per contract. Each contract represents 100 shares, so he received 50x100x1.75 = $8,750 cash for selling the puts. If AMD closes above $25 in January, he keeps the cash outright. If AMD closes below $25, and he still is short the puts, he will have to buy 5000 shares of AMD at $25 per share (his broker will handle all of the details of where the shares come from). Since he received $1 3/4 or so per share, his trade will be profitable even if AMD tanks to $23 1/4. The beauty of this option strategy is that this $1 3/4 premium he received has no intrinsic value (the puts are out of the money), and the price will decay with time. If AMD hovers in the high $20's, he could probably buy back the puts in a couple of weeks for $1/2 or so, still pocket a profit of $6k, and eliminate the risk of being assigned the shares. You ought to get a book on options and read it if you're really interested. Selling puts has been quite profitable in 1999, because the extreme volatility of the market has resulted in high premiums for the put sellers. Good luck. BTW - others have implied selling puts is a bullish strategy. It depends. In Elmer's case, he is profitable down to $23 1/4, which is 25% below the current market price. So it doesn't imply Elmer is bullish about AMD increasing from here, only that he thinks AMD will not tumble below $23 1/4 by options expiry in January. Adam