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Strategies & Market Trends : Steve's Channelling Thread -- Ignore unavailable to you. Want to Upgrade?

To: Zakrosian who wrote (87)	1/11/2000 3:21:00 PM
From: Steve Lee	Read Replies (1) \| Respond to of 30051

I tend to buy calls when I think that a stock is going to rise in the short term. This could be due to momentum for stocks such as JNPR or AMAT. Or it could be because a stock has broken through resistance and therefore possibly into a new trading channel. In the case of INTC it was because of the breakout above, I think, 84. I bought the RMBS calls today because RMBS was sitting at support (just above 82) and RMBS stock's "personality" is such that it doesn't stand still for long. It could quite possibly go down but it would have to break thru its support. Going up is a lot easier for it as there is no immediate resistance. The trouble with leaps is the erosion of time value if the stock doesn't rise soon after you buy them. If it does rise soon after, then you may as well have bought short term options. Of course if you have leaps that are far out the money, there is not much premium to lose but also less chance of the stock getting there. So you could clean up but you run the higher risk of worthless expiry. Leaps is a good strategy if you are sure that a stock is way undervalued but you don't know when its day is going to come (in my view Intel fits this description and the LEAPS premiums are not too high compared to what i think the appreciation potential is for INTC stock). My own strategy for INTC is to make money on short term options on various stocks and funnel a good part of the profits into long term holdings of INTC stock. Chuck Mellon has written a book "How to invest your way to wealth" with strategies and explanations that I have found very helpful: chuckmellon.com