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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: pompsander who wrote (201)	12/28/1999 12:44:00 AM
From: pompsander	Read Replies (2) \| Respond to of 8096

Thanks to Poet, Jill, Rose and all on this thread...what a great addition to the SI boards! For what it is worth, I have sold naked puts over the past two years according to a personal strategy with which I am very comfortable. I am sure everyone has their own way of approaching this potentially hairy investment play, but mine has worked well for me. First, as others have said....you have to love the stock. My first rule is that if it is in fact put to me, I will be happy. This rule has kept me out of selling Rambus puts, Dell, and even MSFT (due to anti-trust uncertainty). It has kept me selling CSCO, JDSU and GE, for example. Second, I will sell a put only on a stock which has dropped six percent or more from a recent new high, without meaningful news. Basically, I sell on the slight retrenchment which often accompanies strong runs of excellent companies. Third, I will sell a put which will expire no more than fifty days out. (Sorry, just my magic number). Enough Time for the company to catch its breath and begin to run again. Not long enough to let me feel truly "naked". Over the past two years I have sold CSCO six times, GE twice and JDSU twice. None are more than ten contracts, but I have never had the shares put to me and, as I said, had it occurred, I would have found the cash to take them rather than buy back the puts because I love the companies. If I could get CSCO at 95 (even if it was trading at 90 on the day my contract expired) I would feel fine. At present, I recently sold the Jan/2000 CSCO 95s when the stock slipped from what had been its high of 103.5 to 98. Sold 10 contracts and pocketed $2300. Used the premium to buy GMST calls. If (and I do not expect this to happen) I am put the CSCO in January, I will smile and sell some Fannie Mae shares to meet my obligation. (The fannies were very,very good to me for years - bought leaps since 1992 - but not recently! Time to move on). This can be looked at as a means of forced rebalancing, but one has to be ready and willing to change some positions...and if not in a tax-advantaged account to bear the tax burden. As I say, just one way of looking at the possibilities.